Term Life Insurance for Home Loans: The Maximum Security
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Term Life Insurance for Home Loans: The Maximum Security

Buy Life Insurance Now
  • 29th Oct 2021
  • 67
Term Life Insurance for Home Loans: The Maximum Security

We all think about buying our own house at some point in our lives. This dream comes to a step closer when we start earning. We think of everything starting from the size of the house, to the color, the decor, and the number of rooms it will have. The multiple responsibilities and financial burdens that come with adulthood make it difficult to fulfill this long-awaited dream. However, home loans become the facilitator that helps us achieve these goals.

When we invest in a home, or a property for the same and opt for a home loan, we are required to pay a certain amount every month to the company from where we have availed the loan. This is a long-term process that requires thorough planning and stretches out to 20-30 years or sometimes even more. While we may have visions and goals for ourselves, we cannot tell what life has to offer in our journey. Hence, it is advisable to opt for term insurance for home loans, which can help pay off the home loan debt so that the family can continue to keep the home that has been bought for them.

What is term plan?

When you ask the question “what is a term plan?”, the answer is quite simple. Term insurance meaning is a measure of safeguarding oneself from a financial burden that may fall upon us in case of an unforeseen event. A term plan requires us to pay a certain pre-decided amount as a premium to the insurer for the maintenance of the policy.

How are term insurance policies and home loans related?

We can pair a home loan with a term life insurance policy or get a term plan for a home loan. This implies that if in the duration of the payment of the loan, anything happens to the borrower because of which they are unable to work - this is specific to an accident, disability, demise, illness, and not the loss of job due to other reasons - the insurance will help their family, pay off the loan and secure them from a potential debt.

The amount invested in the term life insurance for home loans can be used by the family to complete the payment of the loan, therefore promising a secure future for your family when there is no steady flow of income.

Why is a term plan the best choice?

Now that we have answered, ‘what are term plans’ and ‘how can they assist home loans?’, let us look at why should we choose them in combination:

  • Term insurance offers premiums that are more affordable with higher coverage.
  • A term plan tied to a house loan typically features a mechanism where the cover lowers as the loan is paid off and is intended so that the cover is zero by the end of the term, leaving no balance.
  • In a term life insurance policy, the sum assured remains the same. Therefore, we get the balance amount after the payment of the home loan as well, which can be used to meet other needs.

Term life insurance policies ensure the greatest financial security for us and our loved ones, so choosing a suitable one becomes important to make our dreams of having the ideal home come true.

So, now you know what is term plan and what its significance is for home loans. Whenever you are investing in home loan term insurance, you can secure the home loan by correctly calculating the amount of the sum assured that may be needed. To ensure this, it is recommended to opt for a term insurance plan with a coverage at least 10-15 times their annual income and add to it the amount of the home loan.

- A Consumer Education Initiative series by Kotak Life

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