Home Loan Insurance vs Term Insurance: What’s the difference?

Home Loan Insurance and Term Policy differ from each other significantly in terms of the coverage offered. Both offer financial protection but are tailored to meet different needs.

In India, the dream to buy a house is typically met by purchasing a Home Loan. Before you finalise a loan offer, you usually check the home loan interest rate and calculate your EMIs using tools like the Home Loan EMI Calculator.

While you plan meticulously for the expenses incurred on account of a Home Loan, why not also plan to take care of the repayment in the event of your absence and spare your loved ones from a potential financial burden? Loan insurance can be the best solution for this.

Let us discuss how a Home Loan Insurance and a Term Policy can help secure you and your family.

What is Home Loan Insurance?

A Home Loan Insurance Policy is designed to protect you and your family from the financial burden of repaying the outstanding loan balance in the case of an unfortunate event. This type of insurance covers the outstanding balance while also giving you tax benefits.

Home Loan Insurance: Pros and Cons

Pros:

• Provides financial coverage for the outstanding loan amount
• With this insurance in place, you can prevent the risk of foreclosure or losing your mortgaged property
• Premium rates are included in the Home Loan repayment schedule

Cons:

• The coverage of this plan is limited to repayment of the outstanding balance of your Home Loan
• The premium rates are generally higher when compared with other policies
• It offers limited flexibility and does not offer comprehensive coverage

What is Term Insurance?

A Term Insurance policy is a basic Life Insurance product that provides broader coverage for a certain period. You can choose this type of insurance to protect you and your family for the tenure of your Home Loan repayment.

Term Loan Insurance: Pros and Cons

Pros:

• Provides more comprehensive coverage
• Offers flexibility in terms of coverage and duration
• Offers affordable premium rates, making it easier on your pockets

Cons:

• Premium rates increase with age
• Term insurance does not typically offer maturity benefits. It offers financial coverage only after death or severe disability

Home Loan Insurance Vs Term Plan: Key Differences

Also Read: Types of Home Loans: 5 different kinds of Home Loans

Frequently Asked Questions

What are the pay-out options available for Term Plans?

The pay-outs offered by Term Plans are often by giving a lump sum amount to the beneficiary. Some insurance companies may also offer fixed or increasing monthly pay-out options.

Is it a good decision to buy insurance with a Home Loan?

Yes, buying insurance with your Home Loan will secure your family from an unprecedented financial burden. You can choose the best type depending on your budget and requirements.

Do we get money back in Term Insurance?

A regular Term Insurance offers financial aid through lump sum pay-outs in case of death. However, there are certain term insurance plans that offer money-back options. But these may have higher premiums when compared to a regular term plan offering the same coverage.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.

Disclaimer: Purchase of insurance product by Bank’s customer is purely voluntary and not linked to any other facility from the bank.