Friday, December 13, 2019

Home Insurance Or Term Plan, Who Is Better In Both

Vip technique

Buying a term plan is better than insuring a home loan


Home Insurance Or Term Plan, Who Is Better In Both

Introduction

We take a home loan from a bank to buy a house, then also offer to take its insurance cover. This is called a 'home loan protection plan'.
                  In the event of anything untoward happening to the person taking the insurance during the repayment period, the outstanding balance is repaid by the insurance. However, insurance experts say that buying home loan insurance is a loss deal. In comparison, a term plan at a lower premium is a profitable deal.

Home loan insurance is expensive-

When you take a home loan, the bank asks you to take the cover of its entire amount. Normally its premium has to be paid in one go. In such a situation, you make a home loan of Rs 25 lakh. So the premium amount is also added to the home loan. This also increases EMI. At the same time, due to the cover of the home loan, the insurance cover also decreases as the loan amount decreases. This causes double damage. In such a situation, you pay interest on the home loan and also pay interest on the premium of the loan taken due to insurance cover. Insurance experts say that you should also avoid such a policy sold with a home loan.

The family may have to repay debt-

There are three types of home loan insurance. The first of these is a decreasing cover plan. With the reduction in debt outstanding, insurance cover also decreases. Apart from this, there may be other difficulties also. For example, you take a home loan at 8.50% interest but the rates go up later. In such a situation the ability of the borrower to repay the loan will decrease and the arrears will be more than before. If the borrower dies prematurely in case of a policy reducing the insurance cover, then the insurance cover may be less than the outstanding loan. In such a situation, the family may have to repay the debt.

Premium is more than a term plan-

In-home loan insurance, the other options companies also offer fixed plans. There is no change in the sum of insurance. The third option is the hybrid plan. In this, the sum of insurance is fixed for a few years and starts decreasing thereafter. One disadvantage of home loan insurance is that you pay the full premium in advance. In such a situation, you do not have the option to make any more changes. At the same time, the premium in the term plan is cheaper and the insurance cover is higher. You can buy a term plan up to Rs 50 lakhs for Rs 5000.

Insurance cover ends when bank changes-

Home loan insurance is not only expensive but also has other disadvantages. If you transfer your loan to another bank or pay it ahead of time, you will not be refunded any part of the premium. Besides, insurance coverage ends when you change a bank and may have to buy new insurance from a new bank.