Myth busted: It is not compulsory to buy home insurance with a home loan
Myth busted: It is not compulsory to buy home insurance with a home loan
In today's world, we see, most people seem to be convinced that home insurance is a compulsory requirement while obtaining a home loan. That is one misconception that deserves to be debunked. Even though lenders will encourage you to consider homeowners insurance to protect what would, in essence, be their investment, it is not mandatory to purchase home insurance along with the home loan. To draw an informed decision, it is pertinent to distinguish between homeowners' insurance, property insurance, and building insurance. This article will clarify these terms to help you through the different options available to you, ensuring that you will spend your money wisely on the right coverage without undue pressure into unwanted purchases.
RBI and IRDAI rules for a home loan and home insurance
When taking a home loan, it is important to know that neither the RBI nor the IRDAI has made taking home insurance compulsory for home loan buyers. Hence, financial institutions cannot compel borrowers to avail of home insurance under this false notion.
Some important points to keep in mind:
If a financial institution wishes to make home insurance compulsory with a home loan, this will be as per its internal guidelines. In other words, they cannot mention that such a rule has been issued by RBI or IRDAI.
Even if a financial institution makes taking home insurance compulsory for home loan buyers, it cannot force them to buy home insurance from them only. Customers can choose any home insurance policy from any insurer they want.
Do not blindly buy home insurance from the same financial institution that has offered you a home loan. You must compare different policies from different insurers and choose one that best matches your requirements. This way, you have a better chance of finding the right policy at a lower premium rate.
Is a financial institution forcing you to take home insurance? Here’s what you should do
Do they have an internal guideline stating that one must have home insurance to avail a home loan facility? In such a case, it is important to know that it is not mandatory for customers to buy home insurance from the same financial institution. However, there are chances that the financial institution will force you to buy home insurance from them. In such a case, you must do the following:
Shortlist a few home insurance policies in the market and compare them with the one the financial institution is offering.
If there is a negligible difference in the premium, i.e., you need to pay a slightly higher premium on the home insurance from the financial institution, you can opt for it.
If the financial institution is charging a much higher premium when compared to other insurers in the market, you can refuse to take home insurance from them. You can also tell them about the guidelines of RBI and IRDAI.
If the official at the financial institution you approach refuses to budge, you can file a complaint with the manager.
In case the financial institution still refuses to cooperate, you can choose another one for a home loan facility.
Tips to find the best home insurance policy online
The best policy for online home insurance guarantees that your investment is secured and provides the peace of mind that everybody seeks. The possibilities of home insurance policies range widely, including homeowners insurance, property insurance, building insurance, and home loan insurance. All these options require sound advice for the selection of the best policy. Here are some tips to guide you
1. Know the Types of Insurance:
Distinguish between the different types of home insurance coverage. Know if home insurance is indeed distinct from homeowners insurance and if property insurance or building and home loan insurance cover your needs.
2. Get Comparing Quotes:
To compare the various companies, use comparison websites to obtain quotes from different insurers' sites. This will lead to competitive pricing and coverage options.
3. Check Policy Coverage:
Go through the contents of every policy concerning all-natural disasters, thefts, and accidental damage. Consider coverage limits, deductibles, and exclusions.
4. Read Customer Reviews:
Research the insurer's reputation and reviews regarding customer service. Well, claims handling becomes important when emergencies do come up.
5. Search for Discounts:
Some insurers may offer discounts when your home insurance is bundled with another policy or if certain security devices are installed in your home.
6. Check with Mortgage Requirements:
For homeowners with mortgages, lenders often specify minimum levels of insurance coverage required, but bear in mind that not all home loan insurance policies are identical to standard home insurance policies.
These tips would help you in making a confident decision about what would obviously be the right home insurance policy for you and your home and finances.
Conclusion
To sum up, it is not mandatory for homeowners to get home insurance along with a home loan, unless it is specified in the internal guidelines of a certain financial institution. However, availing suitable home insurance can secure your property against natural calamities, theft, fire, manmade hazards and other uncertainties. A good home insurance policy not only covers the structure of a property, but its contents as well, and saves you from unexpected financial setbacks.
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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