Term insurance is a simple yet very flexible form of life insurance that many people purchase to safeguard their families from uncertainties. When buying a term policy, it is always necessary to consider your family’s current and future needs so that you can opt for adequate coverage. But apart from that, if you have other financial obligations, such as a home loan for which the EMIs are being paid, you should have term insurance for a home loan.
 

Term insurance for a home loan protection plan is nothing but a simple term plan that is linked to your home loan. Hence, when you purchase the term plan, it is with the understanding that any outstanding EMIs in the event of your death will be repaid by the sum assured of the term policy.
 

However, since the main objective of the term policy is to safeguard your family, you should be able to ensure that after the home loan has been repaid, your family should be able to utilise the remaining sum assured for their sustenance.
 

How much Term Insurance Coverage is Needed for a Home Loan?

One of the main purposes of getting a term insurance plan is to ensure that your family is financially secure in your absence. If you have outstanding debts and loans to be repaid, such as your home loan repayment, term insurance will be beneficial. In case of your untimely demise, the death benefit sum assured from the term policy will be paid out to your loved ones. And if there are any pending home loan EMIs, your family can use some amount from the sum assured to repay these loans. The remaining amount will enable them to lead a comfortable life without any financial obstacles.
 

Keeping these two factors in mind, it is better to opt for a term plan with more coverage amount, such as a 1-crore term insurance or more. If you purchase the term plan early in life, for instance, at the start of your professional career, you can pay low and affordable premiums due to your age.
 

In such a case, even though your term insurance coverage is more, you will not be burdened with hefty premium payments. By opting for a longer premium paying term and policy term as per your needs, you can easily make affordable premium payments.
 

However, the term insurance coverage will also depend on your income. And if you are especially getting a term plan for your home loan, ensure that the sum assured of the term policy is ten times your annual income, which should also include the home loan EMIs. This is important so that factors such as the future rate of inflation do not affect the sum assured of your term insurance plan.
 

Why Should You Have Term Insurance for Home Loans?

People who take home loans safeguard themselves with home loan protection plans. However, the thing with home loan protection plans is that the coverage of such plans is only limited to covering the repayment of the home loan. Your family will not be able to benefit from the home loan protection plan in case of your untimely demise.

But if you opt for term insurance for home loan protection, you will be able to safeguard your family and also your home loan under the same plan. Here are some important reasons why you should choose term insurance for your home loan:
 

• Affordable Premiums
  
  Since term insurance policies are affordable, it makes sense to link your term insurance policy with your home loan. Hence, a single plan with a consolidated premium can help you protect your home loan as well as your family’s financial future. This way, you will not be paying anything extra to get insurance for your loved ones and your home.
  
  
• Changing Lenders
  
  An independent term insurance policy can enable you to shift your existing home loan from one lender to another. And this can be done without you having to sacrifice the premiums paid on the term insurance for your home loan. In the case of home loan protection plans, changing your lender means letting go of the paid premiums and starting afresh. Your term policy offers you the flexibility of opting for another lender. And if you complete the home loan repayments, you can continue paying the term insurance premiums as per the premium payment term to protect your family’s interests.
  
  
  
• Constant Coverage
  
  When you go for a home loan protection plan, the insurance coverage will keep decreasing as you repay the EMIs of the loan. This, however, does not happen with the term insurance policy. The coverage amount you choose will remain constant, and you can continue paying affordable premiums throughout the policy term.
  
  In case of your untimely demise after the repayment of the home loan but before the end of the term policy tenure, your family gets the entire benefit of your term insurance plan. Tata AIA Life insurance term plans offer flexible sum assured options that can help you secure all of your family’s future financial needs without any worries!
  
  
• Analyze Policies
  
  On availing of a home loan, most home loans come with a standard protection plan which may not appeal to your needs. There is seldom any scope for comparing and choosing your home protection plan.
  
  But if you go for a term plan, you have the benefit of choosing your life insurance provider and analyzing their term policies before you choose the one that suits you the best. Home loan protection plans may also involve commissions for all the middlemen, which does not happen if you choose your term insurance for a home loan protection plan.

• Guaranteed¹ Benefits
  
  The sum assured that will be paid out to your family in the event of your death is a guaranteed¹ amount. This means your term plan can secure your family in case of your sudden demise within the policy term. If you choose more coverage amount, irrespective of whether there is an outstanding loan amount, your family can lead a comfortable life even in your absence. And even if there are a few unpaid EMI instalments to be repaid, the death benefit sum assured can easily cover the repayment, thus protecting your family from any stress.
  

Conclusion

Not many people are aware of the benefits of getting their term insurance policy linked to their home loan. By doing so, you are not only saving money by paying very affordable premiums and protecting your home loan, but you can also safeguard your family – and all of this can be done under a single-term plan!
 

L&C/Advt/2022/Sep/2350