Term plan or home loan insurance – which one to choose?

 Term plan or home loan insurance – which one to choose?

In a world where the cost of living keeps increasing due to various factors, the way one manages their lifestyle also gets impacted. This impact is mainly felt on the finances of the household. To avoid relying on savings for the protection of your loved ones, it is advised to invest in a good term insurance plan. There are plenty of term insurance plans that you can find in the market.

In life, there are different needs that can arise at different stages. The major one being a house of your own. As the property rates are always high, most people get a home loan in order to purchase their dream house. Complications could arise, however, if the borrower themselves passes away. In such a situation, you can take a home loan insurance. However, which is the better option between the two: Term insurance or home loan insurance? Read more to get a better understanding.

Home Loan Insurance Or Term Insurance: Which Is Better To Protect Your Home  Loan?

What is term insurance?

Term insurance is a type of life insurance. When you invest in a term insurance, it signals an understanding between you and your insurance company. In the event of your untimely demise, your insurer will pay a specific amount to your loved ones. This amount is based on the plan you selected. You will come across different term insurance plans when you are looking to invest in one. These plans are designed to match the different requirements and budget of each customer.

What is home loan insurance?

When you apply for a home loan, there are various factors that you need to keep in mind. The interest applied on the instalments and the repayment period being the vital ones. However, in the event of your sudden demise, the task of repayment could fall onto your loved ones. This can create a financial burden for them if the loan amount is bigger. In such situations, investing in a home loan insurance policy is suggested. This insurance policy helps your loved ones in paying off the loan without having to borrow money from other sources.

Which is better?

Both these insurance policies serve a different purpose. However, you can clear off your outstanding home loan with the help of your term insurance plan meaning, you do not invest in another policy. Listed below are the benefits that term insurance has over home loan insurance:

1. Premium

One of the major downsides about home loan insurance is the premium payment. As the insurance is required to compensate a large amount of borrowed money; the premium for the policy is higher. Also, you are required to do a one-time payment as there is no option of monthly or quarterly payment in home loan insurance.

On the other hand, you can make lower premium payments for your term insurance. You have the option of making monthly or quarterly payments. This ensures you do not spend a huge chunk of money on premium payment. You can use the term insurance premium calculator to get an idea about the required payment for your term plan.

2. Sum assured

As the name suggests, home loan insurance specifically covers your home loan. The sum assured that you get when you file a claim is used in clearing the loan. If the loan amount happens to be higher, there will lesser amount left to cover other expenses. Once the loan is cleared, the sum assured usually becomes zero. This is not the case in term insurance. Only the amount required is deducted from the sum assured of your term insurance plan, meaning that there will be a substantial amount left in the sum assured. This can be used for vital expenses.

3. Customisation

One benefit that you can enjoy with your term insurance plan is that of customisation. If you wish to increase the amount of sum assured, you can do so. This can be done by increasing the amount of premium that you pay towards the plan. Use the term insurance premium calculator to see how much increase in the cover you would get for extra premium. This benefit, however, is not present for home loan insurance. If you wish to increase the tenure of the insurance, there isn’t an option. This means that you will have to pay the loan off before the insurance lapses.

If you are wondering about investing in a home loan insurance to protect your loan; keep in mind the benefits mentioned above of a term plan. This will help you in making an informed decision.

Dennis Bailey

https://extraupdate.com

Professional beer geek. Alcohol ninja. Social media scholar. Award-winning twitter fanatic. Writer. Basketball fan, mother of 2, audiophile, Saul Bass fan and communicator, collector, connector, creator. Producing at the sweet spot between simplicity and purpose to create strong, lasting and remarkable design. I'm a designer and this is my work.