Is Insurance Mandatory for Home Loan

Home loans mostly last as long as 30 years. It is not possible to be sure about your financial health for such a lengthy period. This is where home loan insurance comes into the picture.

What is Home Loan Insurance?

Insurance companies offer home loan insurance plans to cover the loan liability of a borrower during the loan tenure. In the unfortunate scenario of a financial emergency, loss of job, death, or disability, the insurance policy can protect the borrower from having to pay the outstanding amount.

The insurance company settles the loan amount with the lender, thus relieving the borrower’s family of the financial burden. The policy generally lapses when the loan tenure ends, or if the borrower passes away.

Is Insurance Mandatory for Home Loans?

If you are concerned about the question ‘is property insurance mandatory for home loan as per RBI’, then the answer is ‘No’. As per RBI’s August 2021 guidelines, home loan insurance is not mandatory. 

But it may come in handy if you face troubling times. Buying an insurance plan is solely at your discretion and you can purchase any one of the home insurance plans available in the market. There is no hard and fast rule as to agreeing to the insurance plan provided or approved by the lender.

How do Home Loan Insurance Plans Differ from Home Insurance Plans?

Home loan insurance plans are tailor-made to protect your credit portfolio. The home loan insurance plans have a predecided sum which decreases over time. The pay-out reduces as the loan progresses and the loan principal comes down.

Home loan insurance plans cover only the loan amount that is taken to purchase the property or house.

On the other hand, home or property insurance is designed to protect your assets from natural disasters or thefts. They protect the property in question and they are deemed necessary to avail of a loan.

Conclusion

Property insurance for home loans is necessary as it gives protection to your assets. Getting a loan on an insured property is easier. But if you are searching for ‘is insurance mandatory for home loan’, it is not.

No lender can coerce you into buying an insurance plan for your home loan. You may take a policy to protect you from financial hardships, but it is solely your decision. It is also a good practice to calculate your EMI before taking a house loan so that you can prepare for it.

Home loan insurance plans are beneficial for both the lender and the borrower. The lender gets an assurance that the money they invest will be secure even in the aftermath of the borrower facing a dearth of funds to pay it back. 

The borrower also gets security as they won’t have to give up their dream home in case they are unable to pay the EMIs. In case you are facing difficulty in procuring a home loan or are amidst a financial emergency, you can opt for a moneyview personal loan to bail you out of the situation.

You can get instant personal loans up to Rs.10 Lakh from moneyview with minimal documentation. To know more, please visit our website or download the moneyview app.

Is Insurance Mandatory for Home Loan - Related FAQs

No, home loan insurance is not refundable. But you are allowed to return the policy within 15 days of purchasing it.

No, home loan insurance is not mandatory for procuring a home loan from SBI, or any other bank.

Just like any other insurance, you are required to pay a premium which can be paid either every month or as a lump sum. The premium price depends on multiple factors like the loan amount, the price of the property, your health, and the tenure.

Given that the lender attaches a loan guard policy, you can cancel a home loan insurance even after the loan is disbursed. The insurance must be terminated within 15 days of receiving the policy bond.

Yes, you can claim 2 housing loan interests even if the houses are in the same city.

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