Home loan-undoubtedly this is the single largest force that drives the residential real estate in India today. Of course, the decision to buy a certain property largely depends on the amount of home loan one is comfortably able to repay over a specific period of time.

So, its fair enough, we take a great care and concern in calculating the pros and cons of availing of a home loan but then we miss out a crucial part here despite having all those brainstorming sessions with bankers, advisors, friends and family members. Chances are rare that one thinks about the fate of his family members who may enter into troubled waters in case one dies during the tenure of home loan.


What's the solution?

With rationalization of insurance and financial services in India, a home loan buyer can well get a ‘Home Loan Insurance' that provides a cover against your home loan liability. The product is not just unique but is a great help in ruling out the impact of any unforeseen casualties on one's family members.

Under this, you can avail of insurance against the amount of home loan you had taken from any bank of housing finance Company.


How it works?

The home insurance or mortgage redemption plan works just like any other insurance plan. The difference is that you insure a home loan instead of covering yourself against any casualties or insuring any tangible assets like your vehicle, house or office against accidents and damages.

In case the beneficiary demises during the home loan term, the balance is paid by the insurance company. Explicitly, you have to pay premium either in parts or one time to get the service.


Types of Home Loan Insurance

Under a home loan cover, the insurance company is liable to pay the balance of home loan in case of beneficiary's death, however ICICI Lombard offers a variant in which the amount of sum insured remains constant.

That means in case of beneficiary's demise, the insurer not only pays the balance of loan but also return the remaining amount to the family members of the policy holder.

More on Home Loan Insurance

Loan Tenure: Home loan insurance premium varies as per the tenure and amount of the home loan, as usual.

Age: Unlike 55-years age limit prevalent for life insurance cover, one can avail home loan insurance till the age of 60 years, with necessary medical clearances. In the general course, the amount of premium increases with the age.

Medical History: Regular rate of premium is charged if you are medically fit. On the contrary, if you are identified in the risk categories in the test reports, the premium can be proportionately higher.


Tax Benefit

Interestingly, this plan comes under the category of life insurance and thus you can claim deductions approved for the same under section 80C of Income Tax Act. The catch here is that you lose the right of such exemptions in case the insurance premium is clubbed with your Equated Monthly Installment (EMI) you pay on your loan.

About the Author:
Aditya Jaiswal, advisor of home loans for NRIs, is an associated editor with the site: http://www.guide2homeloan.com. The site is an online portal to provide home loan advice on home loans in India including types of home loans in India, home loan interest rates in India provided by home loan providers in India.