Home Loan Protection

 

 

A home loan protection is an insurance policy that offers financial cover against payment default. A home loan mortgage involves high risk for the lender. Also, some   lenders ask the borrowers to purchase an insurance policy. This insurance policy will pay to the lender in case the borrower defaults on payment due to loss of income, physical injury or death.[br]

 

All the individuals who qualify for a mortgage can purchase a home loan protection plan. However, insurance companies place certain cap on maximum age limit.

Home Loan Protection Plan: Features

One can purchase a home loan protection plan from an insurance company. However, some loan providers also offer these insurance products in association with an underwriting company.

 

Buying a home loan protection plan from the lender can offer additional privileges, such as:

 

• Easy to apply and qualify for an insurance through the lender. This is because an insurance minimizes a lender’s risk so s/he will encourage buying a loan protection plan.

• Less procedural hurdles make it a real advantage too. As the borrower has already undergone identity and income verification process, seeking an insurance plan is easier.

• Lenders cover the borrower under a group insurance plan. Insurance premium for a group is usually lower than individual plans. Group plans also offer better terms.[br]

 

While purchasing a home loan protection plan, one should look for the following features:

 

• Single payment: Opt for a plan which allows combined payment of the loan’s monthly installment and insurance premium. This reduces the risk of a payment default and also saves time.

• Extended benefits: Look for a protection plan which revises the premium as the insured amount reduces. For example, during the initial years, the unpaid debt amount is high. This means that the insured amount is high. However, as the borrower repays the loan, the unpaid loan amount reduces every year. Thus, insurance company should reduce the premium as well proportionately.

• Special advantage: Some insurance companies pay the leftover insured amount, after paying off the unpaid loan, to the policyholder/nominee. One can ask for similar advantages from his/her insurance company.

 

Remember, some lenders also offer low interest rate to encourage a borrower to purchase a home loan protection plan.