Due to soaring property prices, most home buyers today prefer opting for a home loan. Home loan allow homeowners to pay for the property in affordable instalments over several years. However, in case, the borrower unable to repay the loan due to unforeseen circumstances, the burden may fall upon their family. Individuals can protect their family in their absence by investing in either term or home loan insurance. This article compares term insurance vs home loan insurance. Read on to know more.Term Insurance Vs Home Loan Insurance – Meaning
Term insurance is a type of life insurance plan that provides coverage for a specific ‘term’ or ‘period’. If the insured passes away during the term, the insurer pays the policyholder’s nominees a death benefit. The sum insured secures the financial future of the deceased policyholder’s family, allowing them to bear expenses like education, marriage, debt repayment, etc. However, if the policyholder survives the policy term, they do not receive any maturity benefit.
Home loan insurance is a type of insurance wherein the insurance provider protects the borrower and the lender if the borrower is unable to repay the home loan due to unfortunate circumstances like job loss, disability, or death. The insurer pays the remaining loan amount to the lender, up to the agreed-upon sum insured. This way, the burden of settling the home loan does not fall on the borrower’s family.Term Plan Vs Home Loan Insurance – Which Is Better?
While both term and home loan insurance can help policyholder’s kin repay their home loans, there are a few differences between these insurance plans.
Term insurance is considered the purest form of life insurance. The nominee receives a lump sum amount in their bank account, which they can use for any purpose. The insurance company usually does not intervene after settling the claim.
Home loan insurance protects policyholders and their families, and also the lender. Typically, the home loan provider approaches the insurer to complete the claim settlement formality. The funds from the home loan insurance plan are only used to repay the loan and cannot be used for personal expenses.Home Loan Insurance Vs Term Plan – Tax Benefits
Both home loans and term insurance come under Section 80C of the Income Tax Act, 1961. As such, policyholders can claim tax deductions up to Rs. 1.5 lakhs (in total) if they invest in either or both of these insurance plans or investment options. However, if policyholders choose to add their home loan amount and make it a part of their Equated Monthly Instalments (EMIs), they cannot claim tax benefits.Protect Your Home with Home Insurance T
erm insurance and home loan insurance cover loan EMIs in the event of the unforeseen demise of the policyholder. However, policyholders must also protect their home and its content by investing in a good home insurance policy. Home insurance provides financial cover against various natural disasters like accidental fires, explosions, earthquakes, landslides, floods, and human-made incidents like thefts, vandalism, riots, and terroristic activities leading to home damage or destruction. It covers the cost of repairs and replacing valuable items while protecting your financial interests.Disclaimer: The above information is indicative in nature. For more details on the risk factor, terms and conditions, please refer to the Sales Brochure and Policy Wordings carefully before concluding a sale.