When buying a house in India, borrowers can utilise different insurance options tailored to safeguard against potential risks linked with homeownership. It’s essential to grasp that specific insurances, like property insurance, might be obligatory for those applying for home loans, whereas others, such as home loan insurance, are elective.
Thoroughly examining the terms and conditions of the loan agreement is crucial for borrowers. This allows them to ascertain the necessary insurance types and explore supplementary coverage options to protect their investment in the property.
Home Loan Insurance: Financial Security for Homeowners
Home loan insurance, also known as mortgage insurance or mortgage protection insurance, provides financial protection to homeowners who face difficulties meeting their loan payments due to unforeseen circumstances, such as death.
This insurance can be purchased either at the time of taking out a home loan or at any point during the loan term. The cost of the insurance varies depending on several factors, including the loan amount, loan term, borrower’s age and health, and the type of coverage selected.
It’s important to note that home loan insurance is not mandatory, and lenders cannot force borrowers to purchase a policy as a condition of obtaining a home loan.
Property Insurance: Mandatory Protection for Homes
Property insurance is mandatory for home loans in India. However, borrowers have the freedom to choose the insurance company from which they obtain this coverage.
For instance, the State Bank of India (SBI) mandates that the mortgaged property be comprehensively insured for its market value against fire, flood, earthquake, and other perils. This insurance must be jointly held by the bank and the borrower. The borrower is responsible for covering the cost of this insurance.
Types of Insurances Available with Home Loans
According to the SBI Home Loans portal, term insurance products are offered by SBI Life Insurance Company. These products provide financial coverage to the policyholder for a specified period. In the event of the insured individual’s death during the policy term, the death benefit is paid to the beneficiary. Term insurance is optional.
On the other hand, SBI General offers property insurance, which covers private residences and protects them from unforeseen damages and natural disasters. Property insurance is mandatory for home loans in SBI.
Weighing the Pros and Cons of Home Loan Insurance
The decision of whether or not to purchase home loan insurance is a personal one. It’s essential to carefully weigh the pros and cons before making a decision.
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