Home Loan Insurance Vs Home Insurance Guide

Posted on: Feb 21, 2022 | | Written by: None

Home Loan Insurance Vs Home Insurance Guide

Arjun was filled with excitement, busy packing for his very first home, the little flat in the bustling neighborhood of Delhi. While he was busy packing, his mother called him up to remind him to insure this new investment of his. “And don’t forget home insurance, beta,” she said, explaining that it would compensate for his furniture and fixtures in case of theft or damage. She also mentioned how home loan insurance would insulate the family from paying up the mortgage in case of any misfortune befalls him. With these words of wisdom weighing down on his heart, Arjun thought that it would be good to know the difference between home loan insurance vs. home insurance to secure his new life and peace of mind.

What is Home Insurance?

Typically, an ideal home insurance policy/plan safeguards the home and its content from all the unusual and unseen loss or damage. With home insurance, one can protect their valuables and houses that may occur due to man-made/natural calamities, theft, etc.

To speak about house insurance a little more, the policy offers two covers: content damage cover and structural damage cover. While content damage cover provides financial support for damage/loss of the content of the property (damage to appliances, furniture) structural damage covers make sure that the financial assistance is offered only if the structure of the property is damaged.

Furthermore, the good news is that home insurance can be bought by both the house owner and the tenant. However, note that the tenants will receive content damage cover only. This is because they are not the owner of the space.

Benefits of Home Insurance

It is a home insurance that should be counted as one of the essential vote banks for homeowners in the whole range of home insurances, protects the homeowner and keeps them or secures him or her financially and mentally.

1. Natural Disaster Protection

In India, most homes are prone to a multitude of natural disasters such as flooding, earthquakes, and cyclones, and home insurance financially protects homeowners from damages caused by these events, saving them from the hassle of getting their repairs or reconstruction done without much cash outflows from their pockets.

2. Coverage against Theft and Vandalism

Theft and vandalism are generally covered by home insurance policies. Meaning, if your valuables were stolen or damaged, you can claim back the costs to restore your peace of mind in a world that is becoming ever more uncertain.

3. Liability Protection

Home insurance generally also carries some part of liability cover so that it protects the insured against legal claims arising out of injuries sustained on the premises. Legal proceedings in India often turn out to be heavy on time and money.

4. Additional Living Expenses

Home insurance cover will also pay for extra living expenses such as food and temporary housing should your dwelling become uninhabitable because of a covered peril event. This way, you won’t bear the additional financial burden while recovering.

5. Peace of Mind

Home insurance allows homeowners to be secure and rely on unforeseeable events. Indeed, this piece of mind would be priceless in a country where uncertainties could arise at any given moment.

What is Home Loan Insurance?

An ideal home loan insurance policy covers all the liabilities of the home loan. This takes place when the borrower fails to pay the loan due to unusual adversities. It denotes that the monthly home loan installments are paid when the borrower fails/is unable to pay the same.

However, home loan insurance covers may vary from provider to provider. Several insurers cover the cost of repaying the loan in case the homeowner/borrower suddenly passes away. Similarly, some insurers cover the loan when borrowers suffer from critical illnesses, lose a job, or get disabled. Needless to say, ensure going through the terms and conditions of the insurance policy to be aware of the components right from the beginning.

Moving forward, a home loan insurance policy is perfect for individuals that have mere savings but wish to purchase a property/house at an early stage of life. This is because the loan repayment is guaranteed by the insurer. The home loan policy comes with any option to repay the loan in single payment or multiple installments at regular intervals.

A good part of the home loan insurance policy is, banks cannot deny a home loan to a borrower under the insurance regulator IRDA just because they refuse to take a package deal. In case you are planning to prepay the loan in a very short period, purchasing a home loan cover might not be ideal. However, if you're taking the loan for a longer period, purchasing this home loan cover is a must.

Benefits of Home Loan Insurance

Some of the benefits that home loan insurances provide are

1. It understands your requirements. Generally, these are third-party products. Hence, banks add it in their packages of home loan plans. Sometimes, banks hard sell it as well.

2. The home loan insurance plan helps the owner to retain ownership of the property even in case the EMIs are not paid duly.

3. Home Loan Insurance protects you in certain/unexpected circumstances where you may find it difficult to afford the loan.

4. This plan acts as a relief to the family. Furthermore, it pays off the rest of the home loan amount in cases of adversity.

5. Premiums paid for home loan insurance are entitled to tax deduction under the Income Tax Act (Section 80C).

How to decide which insurance is right for you?

The perfect choice for an insurance policy can be subjective, yet appears to be a huge task due to the various types available. Some of the main parameters could help you decide

1. Assess Your Needs

Make a study of your specific requirements. If you do own a home, home insurance becomes necessary to protect your property and belongings from risks like theft or natural disasters. If, for instance, you live in a flood-prone area, home insurance will help you protect your investment.

2. Consider Your Financial Situation

Look into your financial obligations. If you have a mortgage, then home loan insurance is something that can help you, as it relieves your family from the burden of the loan in your absence. For instance, this works as a piece of mind for your family if you are the breadwinner.

3. Understand the Difference

Understand the differences among home loan insurance vs. home insurance. While home insurance takes care of property damage, home loan insurance takes care of your mortgage. Choose depending on what part of your financial security needs more support right now.

4. Coverage Options

Find out about coverage options on both types of insurance. Home insurance policies are very different with their coverage, including personal belongings, structural damage, and liability. Ensure that you go for a policy that meets your needs.

5. Talk to a Professional

Speak to an insurance adviser or financial planner who can give you information specifically on your case. They will be able to explain the differences between home insurance and home loan insurance and steer you toward the best choice for your financial security.

Home Loan Insurance Vs Home Insurance

Tabulated below is a list of key differences among home loan insurance and home insurance for a clear picture.

Home Insurance	Parameters	Home Loan Insurance
Individuals can purchase it irrespective of the existence of a home loan Insurance	Availability	Individuals can attain it only if a home insurance is available
Comparatively, home insurance charges a lower premium	Premium	Home Loan Insurance charges a higher premium
Zero impact on the down payment factor	Down Payment	Enables lowering the down payment of the property due to the tax entitlement

Conclusion

Upon conclusion, it is important to note that both the terms are varying yet crucial. While home insurance plans safeguards individuals against all monetary losses incurred due to damage/loss of the structure and content of the property, home loan insurances restrain the bank/ financial institution from selling the property in case the homeowner fails to pay the home loan. The major takeaway here is that purchasing a home insurance policy will help you cut down all financial stress while taking home loan insurance helps if you are planning to take a home loan.

FAQ

1. What is the primary purpose of home insurance?

Home insurance is intended to cover the loss of your property and belongings from certain risks like fire, theft, and natural disasters. It covers your home and belongings for repair or replacement in case of an unforeseen occurrence.

2. What is the difference between home loan insurance and home insurance?

While home loan insurance is meant to cover the lender's interest and the amount pending in the outstanding mortgage in case of the borrower's death or disability, home insurance ensures that the homeowner's personal property and possessions are protected. In other words, home loan insurance pays for the loan, while home insurance pays for the physical asset.

3. Should I consider getting home insurance and home loan insurance?

Whether you require such insurance policies will depend on your financial status at the moment. Home loan insurance adds peace of mind for families that have a mortgage so they know that it reduces the burden in the event of the death of the borrower. It is still important to have your home insurance because this protects the property and its contents. Ideally, both can be supplements for each other.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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