What to do and how to go about it
The most basic piece of advice a financial planner can give is to purchase life insurance through a term plan exclusively, rather than using any other type of insurance product. This piece of advice is also applicable here. If you are technologically skilled and have the ability to do online transactions,
I recommend that you get an online term plan, which is less expensive than a traditional term plan with no product differentiation. The duration of the life insurance policy purchased for this purpose should be the same as the duration of the home loan.
Lenders typically want single premium term plan policies that are specifically tailored for home loans, in which the amount of the insurance premium is incorporated in the home loan and recovered over the course of the loan’s term through increased EMIs. However, I would encourage you to avoid purchasing single premium insurance and instead to get an annual premium payment policy.
That’s because, in the vast majority of situations, home loan borrowers don’t keep their mortgage loan open for the entire term, but instead prepay the mortgage loan as and when they accumulate the necessary amounts. In such a circumstance, the portion of the premium previously paid under the single premium policy is rendered ineffective because the insurance policy is activated only when a matching responsibility is still owed to the company.
What exactly is mortgage insurance?
Home loan insurance is a policy that insures a borrower’s outstanding loan liability in order to mitigate the risk of financial loss in the event of the borrower’s death during the loan repayment period. These insurance provide coverage that decreases in value each year as the loan amount decreases.
In the event of the borrower’s death during the term of the loan, the insurance company will pay the bank the balance of the outstanding debt. A house loan insurance coverage may terminate if the loan is fully repaid, if the borrower passes away, or if the loan is transferred to another financial institution.
What is Personal Loan Insurance, and how does it work?
Allow me to explain what personal loan insurance is in order to prevent you from falling prey to their deception. By choosing an insurance policy for your personal loan, you may rest assured that if any of the unanticipated events such as sudden unemployment, a medical emergency, or even death occur in the future, your personal loan insurance will cover all of your remaining loan payments.
Personal loan insurance will safeguard you and, more crucially, your family from the consequences of such unforeseeable events. You have two options for paying the insurance premium: either upfront with a lump sum amount or through EMIs that are tied to your regular loan installments.
Do you want to go ahead with it? What are the considerations you make while deciding whether to go on with it? Why do banks want you to have an insurance plan in order to obtain a personal loan? Simply continue reading to learn the answers to all of these questions!
Always make sure you can afford what you want.
Yes, you did read that correctly. If you are unable to pay for your insurance, it serves no use. You simply had a personal loan in mind, not an insurance policy. It will be an additional expense for you, and making room in your finances for an insurance premium will necessitate the expenditure of more funds – The entire premium amount will be applied to the loan amount if you choose the payment option. The EMI that is applied will include interest, which merely serves to increase the overall cost of the premium.
Find out if you currently have life insurance coverage.
Personal loan insurance will be completely ineffective if you already have a substantial life insurance policy in place, which will be adequate to safeguard your loan in the event of a catastrophic event. Bank executives will always attempt to sell you the insurance facility, but you can respectfully decline the offer if you already have insurance coverage through another source. However, if your life insurance policy does not completely cover the danger, you should look into other options.
ALWAYS COMPARE DIFFERENT INSURANCE OPTIONS
Because you were unprepared for this, and because bank employees informed you about the insurance plans at the last minute, it is probable that you will choose the more expensive option without having received adequate information about it. As a result, it is critical that you conduct thorough research before selecting an insurance policy. Examine all of the different plans completely; find out the answers to questions such as what the premium rates are and which is the most inexpensive plan for you before deciding on one.