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When exploring the idea of buying a home, one of the first tools people often turn to is a Home Loan eligibility calculator to see if they actually qualify for the loan. Moreover, a Housing Loan calculator is also an important tool that offers clarity on what their repayments might look like.
Although these tools help with planning finances, borrowers often come across another important aspect during the loan process: Home Loan Insurance, also called Home Loan Protection Plans (HLPs). It’s a term that usually surfaces when the Home Loan application is underway, and many wonder whether it’s optional or something they are required to take.
Here’s what it really involves and how it fits into the broader picture of Home Loan planning.
What is Home Loan insurance?
Home Loan insurance is meant to insure the loan balance in case of an unfortunate event like the death or permanent disability of the borrower during the loan tenure. It serves as a financial cushion, so that the burden of repayment is not placed solely on the family of the borrower.
Is it mandatory to buy Home Loan insurance?
No, Home Loan insurance is not legally obligatory. Nonetheless, it can be highly suggested by some lenders as a component of the loan package. In such cases, remember that it is your choice, and you can evaluate the insurance on its own merits before deciding.
When you use a Housing Loan calculator, it gives you an idea of the repayment structure. However, it is important to remember that the premium for a Home Loan protection plan can affect your overall cost. Some lenders may even offer to bundle the insurance premium with your loan amount, which increases your EMI slightly.
What does an HLP cover?
Most Home Loan insurance plans provide coverage for:
- Outstanding loan amount in case of death due to natural causes or accidents.
- Loan repayment protection during terminal illnesses or permanent disability.
- Some plans may also cover critical illnesses and job loss.
The specific coverage varies across providers, so it’s important to read the fine print and understand exclusions and conditions. If you opt for a reducing cover policy, the coverage amount decreases as your loan balance reduces over time, which aligns with how most people repay their loans.
Should you consider taking an HLP cover?
If you are the primary earner in your household, this kind of insurance can be a responsible move. It helps safeguard your family from the risk of losing the home or bearing a significant financial burden in your absence.
It is also useful to note that many borrowers already have life insurance policies. In such cases, it may be worth comparing the benefits of adjusting your existing cover versus taking a separate Home Loan insurance policy. Your Housing Loan calculator can help you understand the EMI difference with and without the insurance premium added.
How to decide if it is right for you
There is no one-size-fits-all answer here. But you can ask yourself a few practical questions:
- Does your current life insurance cover the value of your Home Loan?
- Would your family be able to manage repayments in your absence?
- Are you comfortable with a slightly higher EMI to secure peace of mind?
When you think through these points and also use tools like a Home Loan eligibility calculator to understand your borrowing capacity, it becomes easier to decide based on real figures rather than assumptions.
Final thought
Home Loan insurance offers an extra layer of protection during one of the most important financial commitments you may take on. While it’s not mandatory, it can serve a practical role depending on your life stage and financial responsibilities.
