A home can have a special place in your heart. While many of you might have the privilege to afford a house without any financial constraints, the rest of you might have to take a home loan to afford a house. Since real estate has been rapidly increasing, it can become difficult for most of you to purchase a house in India.
Owning a house can be your financial aspiration. Therefore, you might end up taking a home loan to ensure you get to achieve your goal of purchasing a house. While taking loans can be easy, the real challenge lies in the payment of EMIs on a timely basis. As per a report by the Reserve Bank of India (RBI), a majority of Indians are spending their income to service home loan EMIs as well as borrowing larger loans for buying a property.
Since the loan burden of Indians has significantly increased to 13% after 2015, it is imperative to have a term policy. A term plan is a pure protection plan that can provide a payout to pay your EMIs on time when you are unable to pay during an unfortunate event such as loss of income, physical disability, critical illness, and so on. Let’s understand how to buy term insurance when you have a home loan, as mentioned below:
- Opt for a higher tenure
As the name suggests, a term policy provides coverage for a specific tenure. However, you should not select a term policy for a short duration, for instance, 5-10 years. If you have taken a home loan, you should choose a tenure, which outlives your loan repayment duration, or your retirement age. Moreover, your liabilities can be cleared by the time you reach your retirement age as well as ensure your loved ones remain protected for a longer period.
- Consider the sum assured value
Typically, term insurance can offer a sum assured amount, which can be 10 times of your annual income, home loan amount, or other past debts. Due to the higher coverage amount, you can not only safeguard your loved ones financially but also waive their financial liability from paying your home loans in your absence. The pay-out from your term policy can enable you to pay your outstanding loan amount when you are incapable of doing so.
- Provide accurate details
While filling the form, you should submit the accurate details about your past and present medical history. If you have unhealthy habits of consuming intoxicants like smoking, or drinking, you should disclose it in the policy application form. Providing precise information regarding your health can help the insurer to approve your beneficiaries’ claims faster in your absence. In case the insurer finds out about your hidden medical history, or unhealthy habits your claim would be rejected without any consideration. Use a term insurance calculator to check your premium beforehand.
- Include your nominees
While filling the form at the time of purchase of a term policy, you should list down the nominees you want to cover after your demise. Typically, you should include your spouse, children, or parents as the nominees. Additionally, you can purchase a term plan under the Married Women’s Protection Act to protect your spouse and children financially in your absence. In case you have remarried, you can change the name of your beneficiaries.
- Pick a credible insurer
A term policy from a credible insurance company can help you to receive a comprehensive coverage along with maximum benefits at an affordable rate. You can choose a reputable insurer by reading the reviews, checking the claim settlement ratio, and so forth. Moreover, you can compare various term plan options in the market to understand the features, benefits, and premiums offered by every insurer.
As highlighted above, term insurance can help you to lower the financial burden of repaying your home loan. Moreover, if anything happens to you in the future, it can allow your family to clear your past debts with a term pay-out in your absence. That way, your loved ones can be prepared financially as well as independently when you are not around to protect them.