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Why Should You Secure Your Home Loan With Term Insurance?

Posted in Business/Sale, Economy, and Wealth

A home is a place where dreams are built; memories are created, and moments are enjoyed! 

Yes, this age-old saying is no doubt a wonderful truth in itself.  Many ICICI Prudentialpeople weave a dream of their own and decide to buy their house and thus, take a home loan to turn that dream into a reality.

No doubt, living in your house is a big achievement!

what would happen if you met with an accident or die?

How would your family repay the home loan?

Or worse, you become unable to work due to the critical ailment or disability and lose your job.

Do you think your family would be able to repay your outstanding home loan? If these questions have scared you even for a minute, then it is the time to buy term insurance to prevent your family from feeling the burden of repayment of financial liabilities in your absence.

A home loan is a liability that needs to be repaid, irrespective of whether you are alive or not.

It is one of the longest debts in your life which also requires a long-term commitment.

In the case of your death during the policy tenure, your family will need to repay the home loan. Term insurance helps to mitigate the risk.

  “I hate leaving home, I love what I do, but I’d love to go home every night” Charlie Watts

Let’s have a look at the benefits of insuring your home loan with term insurance plans:

Financial security against death

Term insurance is the simplest insurance cover which provides cost-effective insurance cover against all types of liabilities, including the home loan.

In the case of death of the policyholder, the insurer pays a lump sum amount to the nominee, which would be sufficient to manage household expenses and other financial liabilities, including the home loan.

For instance, Raj opted for a home loan of Rs 50 lakhs to buy his dream house. He also bought a term insurance plan of Rs 50 lakhs to ensure his loan. He was ready to welcome his newborn baby into this new house

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Insurance cover

However, things went ugly, when Raj met with an accident and died.

The insurer immediately paid death benefits to his wife, which she used to manage household expenses, including financial liabilities like a home loan.

Though his wife had a major emotional loss, she did not face any financial trouble, thanks to Raj’s term insurance plan. She even saved some part of the money for the future of their child.

While a term plan can’t minimize the emotional loss, it goes a long way in giving financial security while the family is trying to get back on its feet.

Term insurance is the simplest insurance cover which provides cost-effective insurance cover against all types of liabilities Click To Tweet

Protection against critical ailments and permanent disability

There are various term insurance plans which ensure not only a policyholder against untimely death but also critical ailments, like cancer, tumor, etc. It means, if the policyholder diagnosed with a critical ailment, the insurer will make a lump sum payment which can be used to manage household expenses and pay the home loan EMIs.

Due to the critical ailment, the person may not be able to earn money. With the help of the critical illness benefit, it becomes easy to manage the household and other expenses, including medical and loan EMIs.

In case the policyholder becomes physically disabled due to an accident, the insurer waives all future premiums, and the policy continues to offer coverage.

Low premium

The premium of term insurance is low. By paying a few thousand rupees, you can get coverage in lakhs. For instance, the premium of Rs 1 crore coverage under ICICI Pru iProtect Smart term insurance for a 25-year old non-smoker, is around Rs 6,914/annum.

Tax benefits

The premium of a term plan is eligible to get tax benefits for up to Rs 1.5 lakhs under Section 80C of the Income Tax Act. Term insurance plans with critical illness benefits also enjoy tax deductions under Section 80D. The tax limit is Rs 25,000 for young people and Rs 30,000 for senior citizens. In this way, you can get dual tax benefits.

Our Take

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You have built a home for your family but the home loan is a big liability, and therefore, you should take appropriate steps during your lifetime to cover the liability.

A term insurance policy is a more cost-effective way to accomplish your goals. You can also buy a term insurance policy online to save both your time and money.

As there is no involvement of insurance agents, the insurer makes a saving in the form of distribution cost which is further transferred to the policyholder in the form of low premium rates.

The premium of a term insurance is low. By paying a few thousand rupees, you can get coverage in lakhs. Click To Tweet

Post By Philipscom Contributing Editor Matt Phil

Picture Source: ICICI Prudential,

 

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3 Comments

  1. Hey Philip Verghese.

    Great post with great informations. I really like the post and totally agree with one of your mentioned line in the beginning that a home is place where memories are created, dreams are built and moments are enjoyed. Thanks for listing out the benefits of insuring the home loan with term insurance plan. In todays’s time it is really important to secure our home with term insurance, as it provide us several benefits. we must secure our home with term insurance plans, as it provide us financial security against death, tax benefits and security against critical ailments. As this post will
    motivate many people and readers to avail this insurance plans.

    Really helpful post and thanks for sharing.

    August 16, 2019
    |Reply
    • Hi Aadarsh,
      Glad to meet you here, thanks for your maiden visit and the insightful feedback.
      I appreciate your time, keep visiting.
      Keep sharing.
      Regards
      ~ Philip

      August 19, 2019
      |Reply
  2. Vinayak G
    Vinayak G

    I really liked reading your post!. Very high quality content and useful information. With such a valuable blog I believe you deserve to be ranking even higher in the search engines.

    August 21, 2019
    |Reply

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