Can you ever imagine the financial and emotional trauma that your family may face in case of your sudden death? What about your home loan? Would they be able to pay this in your absence? Read here to know more..
We all dream of living a luxurious life someday. Not everyone is blessed enough to get all the affluences from birth. Some people have to work really hard to earn this leisure. Nowadays, loans have made it comparatively easier to enjoy the comfort of a big house and car. But loan comes with a huge responsibility of repayment on time. As an investor, you must strategize and keep a check on all unnecessary expenses to pay the equated monthly instalments (EMI) on time.
Turning Dreams to Life…
Constructing a well-furnished house takes a lot of toll on one’s finances. You can take the aid of home loans to fulfil this dream. But you must also keep in mind that the loan needs to be repaid on time, even if you are not around. You must plan accordingly that your family and property are secure, if something unfortunate happens to you. This is where term insurance plays a key role. A term plan financially safeguards your family by paying off all existing debts, in the event of your unfortunate demise. There are a variety of term insurance plans available in the market. In case of home loans, you must opt for a term plan that pays at least 10 times the yearly income along with the loan sum to be paid. You can receive a pervasive coverage as high as Rs.1 crore. The premium cost for the same is quite reasonable. However, the premium charges vary from borrower to borrower. Factors like income, age and lifestyle play a major role in deciding the amount.
Term Insurance- Brief Detail
Term insurance is a life insurance cover to the nominee of insured person for a fixed period of time. In the event of your unfortunate demise during the policy period, the assured sum is offered to your beneficiary either as lump sum or monthly pay-outs. In case of one-time payment, the beneficiary receives the entire sum in one go and the contract is terminated. In case of monthly fixed payment, the death benefit is paid in parts over the course of time. It acts as a regular source of income for your family.
There are other options of pay-outs available too. It depends on you to choose the correct pay-out alternative for your family.
Benefits of a Term Insurance
A term plan offers the following advantages to the insured person:
The prominent feature of this plan is death benefit. In case of your sudden death, the claim amount is paid to the family.
It ensures that all your loans and liabilities are cleared when you are no longer around.
Term plans have various riders available with them. These riders increase the scope of coverage available under the plan and provide enhanced claims.
Key Features of Term Insurance
Loss of a loved one can never be replaced. While you are fighting emotionally and mentally over the death of the deceased, term insurance guarantees that you do not have to worry about the financial security. It ensures that the financial independence of the family remains constant, even if you are no longer around. Some of the significant factors of term plan are:
Term insurance for home loan protection ensures that the sum involved in home loan is given to your beneficiary at any time in the policy period, after your demise. It helps the family in clearing off the home loans. The outstanding amount can be used by the beneficiary later as and when needed.
In general, term plan does not come with maturity or survival benefit. However, Term Return of Premium (TROP) plans have introduced this feature, wherein the premium of term plan is completely given to the insured person, if you survive the policy tenure. This plan is gaining popularity as it is a good source of savings along with the insurance benefits.
Lender Change Possible in case of Home Loan
You can anytime change the lender of home loan without abandoning the insurance premium. Also, term plan can be continued even if the home loan repayment is done. You may keep paying the premium or terminate the plan once all the debts are cleared. The choice is yours.
Term insurance schemes offer excellent savings on tax under Section 80C and Section 80D of the Income Tax Act, 1961.
Term insurance policy has a minimum tenure of 5 years. The maximum policy period can range from 25 years to 35 years. Ideally, you must choose a longer period as it keeps the premium amount constant over the entire period. You must select the term plan tenure that you find most suitable.
A policyholder must at least be 18 years of age to opt for a term insurance. The maximum age limit is 65 years. The younger a person is, longer should be the tenure of the insurance. This ensures that the premium remains unchanged for the same amount of cover.
Additional rider benefits can be included in the basic term plan. This proves helpful in increasing the financial security of your family. In case of home loan, you should opt for Critical Illness rider. This will act as substitute, if any critical illness like cancer or kidney failure is diagnosed suddenly.
There are other rider benefits like Accidental Death Benefit rider, Total or Permanent Disability rider, Waiver of Premium Rider etc. available. Based on your working situations and lifestyle, you can opt for the appropriate rider to gain maximum benefit in case of a misfortune incident.
As you can see, there is a wide array of term plans available to choose from. You must compare the different plans, their premium rates, schemes and benefits associated with them, inclusions and exclusions of the policy before making any decision. Though banks too provide term insurance along with home loans, you must be cautious before purchasing the same. As banks are also purchasing insurance from a third-party, there would be additional commission involved. Spend a good amount of time in comparing the rates of premium from various sources (both offline and online) and select the one that is affordable to you.