Why the Term Plan Works Best for Home Loan Liability

Does the term plan work better for home loan liability?  Discover it here

A home loan is the most important thing a person can do with their money. If the mortgage loan isn’t paid back, the house that was put up as collateral could be taken by the lender. To avoid this, people who borrow money make sure they pay back their loans on time. But if something unexpected comes up that makes it hard for you to pay on time, there are a few things you can do.


One option is life insurance, which protects borrowers from the risk that their family will lose their home if they die. There are two kinds of life insurance that can be bought to protect against the risk of the borrower dying too soon. The first choice is an old-fashioned term plan. If the person dies, the life insurance company pays the family the insured amount, which can be used to pay off the loan.

When you choose term coverage, there is no link between the lender and the insurance company. The borrower must buy the term insurance on his own. You might have to take medical tests and meet other requirements to join.

The borrower’s second choice is to buy a Home Loan Protection Plan (HLPP) or mortgage insurance with a shorter term from the lender. In this situation, the lender buys a group policy to cover all of its home loan customers. As the principal is paid off, the plan’s insured amount goes down (or as the loan is paid off).

The co-founder of RenewBuy, Indraneel Chatterjee, told Rediff that HLPP covers the remaining amount of a person’s home loan in the case of an accident, a serious illness, or a disability. She also said that the family’s house or other security won’t be taken by the lender to pay back the loan. She went on to say that the mortgage insurance company has to pay the lender the amount that is still owed.

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HLPP is easy to get. In most cases, you don’t have to get a medical exam. The borrower only has to sign a statement saying that they are in good health.

Deepesh Raghaw, the founder of Personal Finance Plan and a registered investment adviser with the Securities and Exchange Board of India, told Rediff that HLPP is a very expensive hedge. He continued by saying that banks sell this product because it gives them a big commission.

Most of the time, a separate term life policy is best. Compare the prices of term insurance premiums from different companies and buy the one that fits your budget.


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