Which Insurance Should You Buy with An Existing Home Loan?

The Keys To Mortgage Life Insurance – Forbes Advisor

A home is an asset like no other. It is where you make the best memories with your loved ones. Therefore, securing this asset from the risk of loan repayment default is important. If, in the case of your unfortunate demise, the burden of repaying the loan falls on your family, and they are unable to do so, then the risk of the house getting confiscated is high. Thankfully, there are some ways you can deal with this. An effective way would be to buy term insurance. What is the meaning of term insurance? It is essentially a life insurance plan that provides a sum assured to your loved ones in the event of your untimely demise within a certain duration. 

Let us explain to you why you should buy term insurance to secure your existing home loan and its repayment. 

Term insurance is extremely affordable 

Now you must be wondering that you are already paying the EMIs of your home loan and adding the extra premium of a term insurance plan on top of that would lead to more expenditure. That will not be the case because term insurance premiums are quite lower. Plus, if you buy it at a younger age, you get even lower premiums as the risk of you suffering from any life-threatening illnesses is quite low, according to insurers. The term insurance premium may increase with age; so, consider buying term insurance when you apply for a home loan. 

A high sum assured can take care of several other expenses 

If you are worried about several other liabilities that might fall on your family’s shoulders in case anything was to happen to you, term insurance can take care of those liabilities as well. One can opt for a high sum assured amount, such as Rs 1 crore, with their term insurance plan, at an affordable term insurance premium. This high sum assured can be the financial aid that your family needs in your absence. It will help them deal with the remaining home loan EMIs as well as other aspects, such as car loan EMIs, daily expenses, health issues, and so on. In short, it will allow them to live a life of financial well-being and dignity. 

The more the sum assured, the higher will be the premium. A term insurance calculator can help you understand the premium rates for a particular sum assured amount. 

Term insurance riders can take care of other unfortunate situations 

Term insurance does not just offer a life cover. There are various riders that can provide financial aid in various situations. For instance- 

  • Critical illness rider 

If you are diagnosed with a critical illness such as cancer or have to undergo a major organ surgery, it can lead to the cessation of a regular source of income at your home. You can be confused as to where you should spend your savings – the treatment of the illness or the payment of the home loan EMI. If you have a critical illness rider, you get a lump sum pay-out which can take care of the expenses of the treatment. So, the loan repayment continues without you having to compromise on your treatment. 

  • Accidental permanent disability rider 

You may also face loss of employment and regular income if you suffer an accident and incur severe disabilities. With an accidental permanent disability rider, you get a lump sum pay-out or pay-outs at regular intervals. This aid can help you sail through the stormy financial tides that are the consequence of an accident. The money obtained from this rider can take care of the home loan EMI repayment as well. 

Opting for these riders can lead to a small hike in the premium. A term insurance calculator can help you get an estimate of the same as well. 

Term insurance brings better peace of mind 

The most vital benefit of a term insurance plan is that it brings peace of mind. It assures you that the abode you live in will be with your family, even in your absence. Not only that, but your family will also have enough funds to take care of other expenses. 

Some home loan providers may also offer term insurance plans as a part of their home loan application. While that may seem like a convenient option, it is advised that you opt for a term plan from a reputed insurance provider only. 

We hope that this article has helped you better understand the meaning of term insurance and its importance in securing your home loan. Thank you for reading!