(A) Home loan protection plan (HLPP) insurance:-
1. It's sold by lender along with home loan, where insurer will pay entire balance principal loan amount directly to lender in case of borrower's death, and thus home ownership remains intact with family.
2. Typically, one-time premium payment is made separately, but it can also be included in home loan with marginally higher EMI.
3. Most lenders offer such policies with home loans due to tie-ups with insurers, but one can buy a plan independently as well.
4. Usually, insurers offer risk cover till age of 60-65 years, up to loan tenure, which is always equal to its outstanding amount at any point of time, working on reducing balance principal.
5. A medical check-up may be required depending on insurer's policies, and premium depends on age and medical record of borrower too.
6. Premium is doubled in case of a joint application, as insurer is liable to make good the loss in the event of death of one of the joint applicants.
1. It's sold by lender along with home loan, where insurer will pay entire balance principal loan amount directly to lender in case of borrower's death, and thus home ownership remains intact with family.
2. Typically, one-time premium payment is made separately, but it can also be included in home loan with marginally higher EMI.
3. Most lenders offer such policies with home loans due to tie-ups with insurers, but one can buy a plan independently as well.
4. Usually, insurers offer risk cover till age of 60-65 years, up to loan tenure, which is always equal to its outstanding amount at any point of time, working on reducing balance principal.
5. A medical check-up may be required depending on insurer's policies, and premium depends on age and medical record of borrower too.
6. Premium is doubled in case of a joint application, as insurer is liable to make good the loss in the event of death of one of the joint applicants.
(B) Term Plan insurance:-
1. A term insurance life cover plan works better than a HLPP because it gives more value for insurance premium paid.
2. It's a pure insurance cover where in case of policyholder's death, his nominee gets sum assured (i.e. cover amount), while he doesn't get anything on surviving till policy period.
3. Thus, in case of death, family gets entire cover amount, irrespective of pending loan payment, as against only outstanding home loan amount given to insurer in a HLPP.
4. Therefore, even after settling loan amount, family can still have a surplus amount from term insurance cover proceeds.
5. Both co-borrowers should buy term insurance policies in their individual capacity, as they will be very handy for the surviving borrower in every way.
6. Although total premium outgo may seem a "waste" upon survival of home loan period, it is actually more economical as the substantial risk cover remains same throughout policy tenure which may be even more than home loan period, whereas risk cover keeps reducing under HLPP and lapses on home loan repayment.
7. Monthly premium for 50 lakh term insurance cover for 30 years, for individual spouse between 30-35 years age, may not be more than 1,000 each (go for 1 crore term cover each if home loan is more) to sufficiently cover home loan insurance on either's demise, while leaving something on the table too.
1. A term insurance life cover plan works better than a HLPP because it gives more value for insurance premium paid.
2. It's a pure insurance cover where in case of policyholder's death, his nominee gets sum assured (i.e. cover amount), while he doesn't get anything on surviving till policy period.
3. Thus, in case of death, family gets entire cover amount, irrespective of pending loan payment, as against only outstanding home loan amount given to insurer in a HLPP.
4. Therefore, even after settling loan amount, family can still have a surplus amount from term insurance cover proceeds.
5. Both co-borrowers should buy term insurance policies in their individual capacity, as they will be very handy for the surviving borrower in every way.
6. Although total premium outgo may seem a "waste" upon survival of home loan period, it is actually more economical as the substantial risk cover remains same throughout policy tenure which may be even more than home loan period, whereas risk cover keeps reducing under HLPP and lapses on home loan repayment.
7. Monthly premium for 50 lakh term insurance cover for 30 years, for individual spouse between 30-35 years age, may not be more than 1,000 each (go for 1 crore term cover each if home loan is more) to sufficiently cover home loan insurance on either's demise, while leaving something on the table too.