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  • Term Insurance vs Home Loan Insurance: Know what’s best for you

    Published on March 11, 2020

    A home can have many sentiments. As Indians, buying a house can be one of your goals in life. While many of you might prefer investing in a house willingly, you should consider the number of funds you have currently before buying. Since buying a new home can be a long-term investment, you might end up borrowing home loans to fulfill your lifelong dream. However, term insurance and home loan insurance might have replaced home loans today due to its maximum protection. Therefore, let’s understand the meaning of a term policy and home loan insurance separately:

    What is Term Insurance Policy?

    Term insurance can be a part of a traditional life insurance policy, which has been in the market for a long time. The primary idea behind the formulation of term insurance is to offer family protection to your loved ones in your absence. Hence, a term life insurance would initially offer only death benefits to your family members after your demise. However, as years progressed further, many insurance companies availed the new-age term plans, which can offer survival benefits as well as death benefits with customized features.

    What is Home Loan Insurance?

    Home loan insurance or mortgage insurance can allow you to secure the future of your loved ones from the unpredictability of life. It can be a scheme that can allow you to settle your outstanding home loan amount during an unfortunate event. Many home loan insurance policies can cover you, your house and other contents of the policy. The premium that you pay in return for the cover can be eligible for tax exemptions.

    Since term insurance and home loan insurance are the two most popular choices in the market, you might be unable to make a selection between the two. Since these two protection plans can safeguard the future of your family, you might assume they offer similar features and benefits. However, a term policy and home loan can be different in many things, as mentioned below:

    1. Coverage

    Term Insurance: The survival benefits can allow you to repay you your home loan when you are alive. After your demise, the death benefit can ensure that your family members can clear your past liabilities without any financial burden.

    Home loan insurance: Typically, the home loan insurance can cover your sanctioned home loan amount. However, the life cover recedes after the complete payment of your home loan.

    1. Premium

    Term Insurance: Under a term policy, you can have the freedom to pay the premium based on your convenience. Typically, you make the premium payment annually, half-yearly, monthly, or quarterly. Before purchasing a term policy, you should calculate the premium beforehand to check to see if you can afford the amount.

    Home loan insurance: When you purchase a home loan insurance, you should make a lump-sum premium payment. Under home loan insurance, the premium value can be relatively high, which can be included in the total cost of your home loan.

    1. Variants

    Term insurance tax benefits: The new-age term plan can offer different variants based on your evolving needs. However, the variants offered under term insurance can differ from one insurance company to the other. In addition to this, many insurers can provide add-ons such as physical disability cover, critical illness cover, and so forth to enhance your base term policy.

    Home loan insurance: Under home loan insurance, the add-ons can cover the EMI payments for 3-6 months. However, many home loan insurance policies might only cover EMI payment after obtaining the pink slip.

    1. Tax benefits

    Term insurance: Term insurance can allow you to reduce your tax liability in accordance with Section 80C of the Income Tax Act, 1961. As a policyholder, you can be eligible to claim a deduction up to Rs. 1, 50,000 on your taxable income, according to Section 80C.

    Home loan insurance: Under Section 80C, home loan insurance can be eligible for tax exemptions similar to term life insurance.

    To sum up, a term policy and home loan insurance are two different policies that can help with the financial sustenance of the loved ones. Therefore, compare multiple options and choose the right insurance product based on your requirements. Typically, selecting term insurance can be a better choice since it covers all your liabilities as well as looks after the financial well-being of your loved ones. Moreover, it can be flexible, convenient, as well as an affordable solution for all your insurance requirements.