Like most people, you must have saved for several years and maintained financial discipline before you were able to buy your dream home. The ever-escalating rise in the prices of real estate properties often makes it necessary to avail of a home loan. Most lenders finance up to 80% of the total value of the property. The balance 20% needs to pay through your personal sources towards the down payment of the home. In addition to the price of the home, you will incur expenses such as stamp duty, society charges, registration, and furnishing the house.
Experts recommend that the Equated Monthly Installment (EMI) of the home loan should not be more than 50% of your total income. This ensures you do not face any financial stress while making the repayment and are able to meet your regular household expenses.
Why should you cover your home loan?
Home loans are often repayable over 20–25 years on the assumption that you will be earning a regular income during this period to make timely repayments. Unfortunately, there is no certainty in life and in case of an unfortunate event; the home loan EMI may become a huge financial burden.
It is very important to cover your home loan. In case of an untoward incident, a home loan protection plan provides financial stability to your family. Here are three reasons why you must avail of term insurance for your housing loan.
- Larger coverage for an affordable premium
A term insurance plan is an affordable way to procure a larger coverage. It is recommended that you purchase term insurance against the home loan for higher protection. In case of an adverse event during the policy term, the insurer pays the death benefits to your family. This money may be used to pay the outstanding balance on your home loan.
- Available with fixed benefits
Several financial institutions provide life coverage that also works as a mortgage protection insurance plan. As you continue making the timely repayment and the outstanding principal decreases, the coverage also reduces. The primary purpose of such plans is to secure your home loan.
The sum assured under a regular term plan remains constant during the entire policy duration. The benefits received under the term plan may be used to pay outstanding home loan or meet any other expenses in case of an unfortunate event.
- Supportive during home loan transfer
When you avail of home loan insurance from any insurer, the coverage continues irrespective of the lending institution. Therefore, if you want to transfer your home loan from one lender to another, the coverage under the insurance plan continues. There is no need to procure another policy in case of a home loan balance transfer.
Term insurance is an affordable way to procure higher coverage. Even after the home loan is repaid, the coverage continues protecting the financial stability of your family members in your absence. It is an excellent way to safeguard your outstanding loans and existing liabilities.