Term insurance plans provide a life cover to secure the policyholder’s family in the event of their unexpected death during the policy tenure. In India, a term insurance policy can be a helpful tool for protection against home loan risks.
Term plans can help the family manage the financial crisis and pay off the debts to lead a comfortable life. However, choosing the right term insurance plan with the required sum assured and policy features is important to ascertain the benefits.
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Term Insurance For Home Loan Protection
A home loan requires the borrower to pay a monthly instalment. The monthly instalment will pay interest and repay a portion of the principal, and together they clear off the debts during the loan tenure. Unfortunately, if the borrower meets with a fatal incident, he may not be able to repay the loan, and the family has to bear the burden. In such scenarios, the benefit of term insurance fetches the importance of reducing the family’s financial risks.
A term plan can pay out a death benefit to the policyholder’s beneficiaries, which can be used to clear off their debt, protect their assets and lead a comfortable life even in the absence of the policyholder.
In addition to covering the risk of death, a term insurance policy can provide add-on riders for enhanced protection. For example, term insurance policies offer health riders that provide critical illness coverage, terminal illness coverage, waiver of premium cover, etc. It can provide additional financial support for paying the medical expenses for the policyholder during the policy tenure if they are diagnosed with a serious illness such as cancer or heart disease.
Therefore, it can reduce the financial inconsistencies when the policyholder is ill and pay the home loan instalments regularly by reducing medical expenses.
Factors To Consider
A few key things to consider while purchasing term insurance for a home loan in India to cover your home loan risks are:
- Choosing the right term policy with the required death benefit to cover the outstanding balance on the home loan.
- Considering the policy tenure for the term insurance policy based on the home loan repayment period. A longer-term will generally provide more protection but will also come with a higher premium. Weigh the cost of the policy against the amount of protection it provides to determine what works best based on the needs.
What Should Be The Term Insurance Cover For Home Loan Risks?
There are a few steps to follow while buying a buy term insurance for home loan risks in India:
- Determine the required coverage – Consider the outstanding balance of the home loan and how much protection is required to cover this amount adequately. Include the interest and the principal repayment portion while deciding the sum assured for the term insurance for home loan protection.
- Choose the required riders – Based on the lifestyle and family’s medical history, the policyholders can choose the required riders for enhanced protection.
- Calculate the premium – Determine the cost of the policy by calculating the premium by considering the sum assured, add-on riders required, etc., The premium will depend on various other factors such as the sum assured, including the coverage for home loan risks, the length of the term, age, health condition, etc.,
Policyholders can utilise the term insurance calculators to determine the sum assured and the applicable premium.
For instance, the Tata AIA term policy calculator considers different factors, such as age, gender, sum assured, premium payment mode, etc., to determine the premium for the policy tenure. It can also calculate the applicable premium return if the policyholder chooses the term plan with the premium return option.
Conclusion
A term insurance plan can be a valuable tool for covering home loan risks in India. By providing financial protection in the event of the policyholder’s death, a term insurance policy can help to safeguard a family’s financial future and protect them from the burden of a mortgage. Determine the required coverage, compare policies from different insurers, and calculate the premium to get the most out of a term insurance plan.
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