The season of festivals as we know it in India is over. In Kolkata, Durga Puja is the festival and when it is over, everyone becomes morose and looks forward to the next year.
Of course, there is Diwali, and Kali Puja. And Jagaddhtri Puja also takes place selectively at some localities. But no festival beats Durga Puja in Kolkata.
Even then, this happens every year. Residents of the City of Joy look forward to welcoming the winter. Winter is rather pleasant in Kolkata and not as harsh as in North India.
Winter has its own charm in Kolkata. It is a period of picnics and going out even a short journey, and various gastronomic delights. Although people prefer eating out in restaurants in this season, home kitchens also turn busy with winter special fare, whether it’s koraishutir kochuri or some sweet dish prepared with nolen gur, date palm jaggery.
On one such lazy Sunday morning, Raj and Moonmoon visited Moonmoon’s father’s home at Jodhpur Park. Her mother invited them as she planned to cook koraishutir kochuri and notun alur dum.
Once it is served, there was silence. Conversation stopped as everyone focused on the food. Only after it is finished off and a cup of hot tea arrived for everyone, the conversation started once again.
Moonmoon’s father asked a question to his daughter and son-in-law, “Did you consider home loan insurance after you took home loan for buying your flat?”
“Actually, no,” said Raj.
“Is it really necessary? We will surely buy home insurance once we start living there,” said Moonmoon.
“I think you should know about it,” said her father.
Home Loan Insurance is Different from Home Insurance
“A home insurance plan protects borrowers in case of structural damage to their properties. On the other hand, a home loan insurance cover guarantees protection if the borrower is unable to repay the home loan due to any untoward situation,” said Moonmoon’s father and went on to explain.
A home insurance policy offers protection against natural disasters or any man-made disaster whereby the home and/or its contents are damaged or destroyed. Any monetary loss arising out of such an incident can be covered by a home insurance policy.
But the scope of a home loan insurance policy is different from it. It is to ensure that in the case of any untoward situation for which the home loan EMIs cannot be paid, the insurance company will take care of home loan repayment.
Such situations may arise due to the sudden death of the primary borrower, job loss, or a major accident and resultant income loss. The terms and conditions of your home loan insurance policy depend on the type of policy you have taken. Many comprehensive home loan insurance policies are available in India that offer different covers.
Why Home Loan Insurance is Necessary
“Is it really necessary to buy a home loan insurance if a borrower is already covered under life and accident insurance? asked Raj.
“Even if a borrower is covered under life and accident insurance, it is preferable to opt for a home loan insurance policy,” said Moonmoon’s father.
In the case of any unforeseen mishap such as the death of the primary borrower or a debilitating accident, the family is in a financially difficult situation. In such a situation, if financial resources from life or accident insurance claim amounts are utilised for paying the home loan, the financial standing of the family will remain strained.
A home loan insurance offers financial protection to the borrower in any such misfortune.
Home Loan Insurance Coverage & Premium
Home loan insurance generally covers the borrower towards the payment of the home loan outstanding in case of the inability of the borrower to do so. Under a joint loan, single home loan insurance can cover all the borrowers.
Most home loan insurance policies cover the insured against critical illnesses such as cancer, disabilities, and sudden illnesses such as heart attacks.
Although home loan insurance is offered up to 20 years and ends with the full payment of the home loan outstanding, some banks are offering to continue it as term insurance. However, the policy could lapse in the case of home loan balance transfer or, home loan restructuring.
Lenders offer three types of home loan insurance that include Level Plan, Hybrid Plan, and Reducing Cover Plan which is as follows:
- Level Cover Plan: Throughout the loan tenure, the coverage remains the same for the insured.
- Hybrid Cover Plan: The coverage remains full during the first year. It starts reducing as the balance amount reduce with tenure.
- Reducing Cover Plan: Both the coverage and outstanding loan reduces with the tenure.
Home loan insurance premium depends on the type of insurance cover chosen by you. Generally, in the majority of the home loan insurance policies, the insured has to pay a one-time premium to the insurance company. However, there are also home loan insurance plans where the borrower can pay the policy premium in certain installments. The amount of money you pay as the home loan insurance policy installment depends on the home loan amount, and the type of cover you have opted for. Your age and medical history also affect the home loan insurance policy premium amount.
You can claim deductions under Section 80-C of the Income Tax Act, against payment of home loan insurance premium.
“Now you know why home loan insurance is preferable while taking a home loan. However, home loan insurance is not mandatory while taking a home loan but depends on the discretion of the borrower,” declared Moonmoon’s father with finality.
With that, the second round of tea was served by Moonmoon’s mother.
