Which is Better Home Loan Insurance Vs Term Insurance?

I’ve provided a detailed comparison for home loan protection plan vs term insurance to help you decide which might be better for you.

Which One is Better Home Loan Insurance or Term Insurance?

Home Loan Insurance

Purpose: Home loan insurance is designed to cover the outstanding loan amount in case of the borrower’s death or disability. This ensures that the borrower’s family is not burdened with repaying the loan.

Key Features:

1. Loan Protection: The primary benefit is that it ensures the home loan is paid off, securing the home for the borrower's family.

2. Decreasing Coverage: Typically, the coverage amount decreases over time as the loan balance reduces.

3. Tied to the Loan: This insurance is specifically linked to the home loan and usually provided by the lender.

Pros:

• Ensures that the home loan is paid off in the event of death or disability.

• Provides peace of mind knowing that the family won’t lose the home.

• Often easy to obtain and sometimes mandatory from the lender.

Cons:

• Coverage decreases over time, reflecting the reducing loan balance.

• Limited to covering the home loan and does not provide additional financial support to the family.

• Usually cannot be transferred if you refinance or switch loans.

Term Insurance

Purpose: Term insurance provides a fixed sum assured to the beneficiary in the event of the policyholder’s death within the policy term. It offers broad financial protection for various needs, including paying off debts, living expenses, and other financial goals.

Key Features:

1. Fixed Sum Assured: The coverage amount remains constant throughout the term.

2. Versatile Use: The payout can be used for any purpose, not just paying off a home loan.

3. Separate from Loans: It is not tied to any specific loan and provides broader financial security.

Pros:

• Offers a fixed sum assured that can cover a variety of financial needs, including home loans, education, and living expenses.

• Provides comprehensive financial protection to the policyholder’s family.

• The coverage amount does not decrease over time.

Cons:

• Premiums might be higher if you choose a large coverage amount.

• Requires the beneficiary to manage the payout and allocate funds appropriately.

This is the difference between home loan protection plan vs term insurance.

Choosing between home loan insurance vs term insurance requires understanding their distinct roles. So before delving into the differences, let us focus on what each of them implies.

If unfavourable circumstances arise during the loan term, a house loan insurance policy guarantees to return the remaining balance to the lender. This is probably added at an additional expense to the total amount of the property loan.

 In the event of an unexpected event, such as an unexpected death, these plans provide the policyholder's designated beneficiaries with a lump sum payment.

A term insurance policy has a set period of validity. If the insured lives out the period, no one is compensated.

Home Loan Protection Plan Vs Term Insurance?

To protect your house loan, you must decide between term insurance and home loan insurance. Always take suitability into account when deciding between a term plan vs home loan insurance. Before making a choice, consider premium costs, coverage, add-ons, and other aspects.

Read More: