Rajesh Thiruvala bought his dream house last year. Sadly, soon after him, along with his parents, young wife and newborn son moved in, Rajesh met with a road accident and died. He was the sole breadwinner of the family and not being able to cope up with the financial burden of the home loan, his family was forced to evacuate the house. Had Rajesh opted for a term insurance plan along with the home loan, his family would not have had this terrible plight.
Term insurance along with home loan
It is a very common practice to buy a term life insurance plan along with a home loan. This is because a home loan is a long-term and large financial liability. As a loan taker, it is your duty to ensure you repay the loan yourself, while you are well and alive and even after you are gone. A term plan can help you with the latter. How, you ask? Let us find out:
• Covers your home loan: You can opt for a term insurance plan for a time similar to that of the home loan term. If you die within that period, the death benefit from the term plan can be effectively used to repay the loan.
• Keeps a roof over your family’s head: We saw how unfortunate it was for Rajesh’s family to lose their home. As a responsible family person, you would never dream of making your loved ones homeless after your death. So secure their wellbeing and ensure they always have a residence of their own by taking a term insurance plan along with your home loan.
• Doesn’t financially stress your beneficiaries: As mentioned above, repaying the home loan is your responsibility. So if you die before it is paid back, the onus shifts on your immediate family to repay the loan. Your parents may be old and retired. Your spouse may not be financially independent. It would be very unfair to put such a large financial burden on them. You should therefore have a term cover that would never warrant your family members to make any payments on your behalf if you die prematurely.
These are the most significant reasons for you to opt for a term insurance, even while it is not compulsory to do so when taking a home loan.
Can I do without a term cover for my home loan?
You can do without a term cover for your home loan only if you are financially very stable. In other words, you need to have a very high bank balance that can take care of the financial aspects after your demise. If this is the case, you may be alright without opting for a term plan for your home loan. Then, if your other family members have high earnings and can easily undertake the home loan repayment after your death, you may consider not taking a term plan when you take a home loan.
However, since term insurance plans are so affordable and easily available in India nowadays, it would really make a lot of sense for you to cover your home loan with a term insurance. At times, the home loan providers also process your application at a quicker pace if you have a good term cover in place. This is because the chances of default practically become nil and the loan is given with more confidence and assurance.
In a nutshell
To put it in a nutshell, you would be in a better spot if you opted for a term life insurance plan along with your home loan. Many home loan providers offer the term insurance plans themselves and this makes it easy for you to get the insurance cover for your loan. Like mentioned above, term insurance is easily available these days and even if your loan provider doesn’t have a term plan for you, you can get it elsewhere in a hassle-free manner. So keep the points mentioned above in mind and assess your financial and familial situations. If you feel a term cover is absolutely redundant, don’t go for it, but if you feel it is needed, get it without sparing another thought.