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Myth busted: It is not compulsory to buy home insurance with a home loan

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Buying a home is a lifelong dream for many. However, considering the ever-increasing property prices, owning a home or building one can be out of reach for many without a home loan. This loan is essentially a sum of money that one borrows from a financial institution at a certain rate of interest. Now, often, financial institutions force home loan buyers to get home insurance as well. Some may even claim that taking home insurance is mandatory to get a home loan. So, is it actually true? Let’s find out, so that you can borrow in an informed and conscious way.

RBI and IRDAI rules for a home loan and home insurance

When taking a home loan, it is important to know that neither RBI nor IRDAI has made taking home insurance compulsory for home loan buyers. Hence, financial institutions cannot compel borrowers to avail 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

When you are looking to buy home insurance, the following tips will help you choose the best policy:

• Shortlist some reputed insurance companies in your region. You can also ask family and friends for recommendations.

• Check the home insurance policies they offer and make a quick comparison based on their features, premium amount, coverage and more. You can also get in touch with the insurance companies and ask for premium quotes.

• Decide what all you want to cover under home insurance. Most insurance companies offer different options under home insurance. For instance, one policy may cover a property’s structure only, while the other one may cover the structure as well as its contents.

• Check the financial strength of the shortlisted companies and their claim settlement ratios. Always choose a company will a high claim settlement ratio.

• Check customer reviews on their website to get a better idea.

• Select a company and a home insurance policy that best matches your requirements and pocket.

• Select the right sum insured. For this, you must consider the total area of your home and the approximate value of your belongings in it.

• Fill the application form online with accurate information and make the initial payment. You can also select riders or add-ons to extend policy cover.

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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