Home Insurance for Home Loan
What is Home Insurance for Home Loan?
Home Insurance for Home loan is a long-term property insurance policy where the insurer offers coverage for the house and its contents. Digit’s home insurance policy ensures that the homeowner is covered financially for any damage to the house due to factors like fire, flood, storms, etc.
Why is it Necessary to Have a Home Insurance Policy?
It is necessary to have home insurance as it comes in handy in case there is any damage to your house or its contents. The policy ensures that you are financially covered for the losses incurred due to the damage caused. In addition to that, it makes sure that the home loan does not turn into a bad debt for the lender.
Is it Mandatory to Buy Home Insurance when taking a Home Loan?
Buying a home insurance policy is not mandatory. However, having one is advisable as it is in your financial interest. By paying a minimum premium you can protect your property and its content against any damage given that you have already invested a large sum of money to purchase your dream house.
How is it Beneficial to Have Home Insurance when taking a Home Loan?
Availing a home loan is a big commitment as a major amount from your earnings goes towards repaying the loan for a long period of time. Given that, a home insurance policy can come in handy for the following reasons -
It protects your family and dependents from debt as the insurer will cover the property.
You can choose add-on covers that protect against permanent disability, severe illness or unexpected job loss.
Difference Between Home Insurance and Home Loan Insurance
When we talk about home insurance and home loan insurance, there are bound to be certain differences between the two. Let us take a look at them in the table below:
| Home insurance | Home loan insurance |
|---|---|
| Home insurance pays for the loss or damage incurred by the house due to mishaps like fire, earthquakes, flood, theft etc. | Home loan insurance comes in handy as the insurer will settle the outstanding home loan amount with the lender in case the policyholder faces unforeseen situations. |
| Premium payable for availing a home insurance policy is low. | For Home Loan insurance, the premium payable is high. |
| Home insurance policy can be bought irrespective of you having taken a home loan. | Home loan insurance can be purchased only if you have availed yourself of a home loan. |
| Down payment of the house reduces because of home loan insurance. | There is no impact on down payment in the case of home insurance. |
Factors to Consider for Buying Home Insurance for Home Loan
While buying a home insurance policy is recommended, there are certain factors that need to be considered before proceeding. Let us take a look at them:
You need to look at the coverage size offered by the insurer before buying home insurance for a home Loan. This is important as most insurers offer diminishing coverage. Good coverage will ensure that you are protected against any eventuality.
The premium which you will be paying also needs to be considered. Given that you are already paying a large sum as EMI for the home loan and there are other expenses to take care of, the premium should not burn a hole in your pocket.
The add-on coverage offered by the insurer is another thing that needs to be evaluated. It will ensure that you get access to more benefits on buying the property insurance policy.
FAQs about Home Insurance for Home Loan in India
How does Home Insurance work?
Home insurance protects you cover the house and its content against any damage.
Can I enjoy tax benefits for availing Home lnsurance for a long term?
Yes, you can enjoy tax benefits for getting yourself a home loan insurance policy. Tax benefits are offered under Section 80C of the Income Tax Act.
What is the maximum tax benefit which can be claimed under Section 80C of the Income Tax Act?
You can claim up to Rs.1.50 lakhs in a financial year under Section 80C of the Income Tax Act.
Is it necessary to buy home insurance for home loan from the same lender?
It is not necessary to buy a home insurance policy from the same bank. Lenders can’t force the borrower to buy a home insurance policy as per Reserve Bank of India (RBI) and the Insurance Regulatory and Development Authority (IRDA).
What factors affect the premium of home insurance for Home Loan?
The premium can be high or low based on factors like location, cost and characteristics of the house, safety measures, deductibles, and the type of insurance policy.