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.
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.
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.
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.
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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 personal loan from Moneyview 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.
Disclaimer
The starting interest rate depends on factors such as credit history, financial obligations, specific lender's criteria and Terms and conditions. Moneyview is a digital lending platform; all loans are evaluated and disbursed by our lending partners, who are registered as Non-Banking Financial Companies or Banks with the Reserve Bank of India.
This article is for informational purposes only and does not constitute financial or legal advice. Always consult with your financial advisor for specific guidance.
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