Protect your family from liability of home loan

Home loan is a big financial liability for a home buyer, not only because the amount involved runs into millions, if not crores, of rupees, but also because the tenure of the home loan runs into a decade or more. If the borrower has a family, this huge liability is a matter of concern and needs to be extinguished at the earliest. But this may not be possible due to other financial obligations, so the liability continues to worry the home loan borrower. The borrower may be worried about the financial fate of his family if he were to die due to road, railway or air mishap or because of some critical illness.

To stop worrying about such unfortunate eventualities and protect the family from financial disaster, the borrower should think of insuring the home loan by buying a term insurance with a sum assured equivalent to the amount of home loan. The premium payable for a term insurance plan is the lowest as compared to other insurance plans, hence it should be only a minor burden for the home loan borrower as compared to the EMI.

For example, if a 28-year-old person drawing a salary of Rs 50,000 takes a loan of Rs 30 lakh at a floating rate of 9% for a period of 30 years, the EMI works out to around Rs 24,000 p.m., while the premium for a term insurance policy of Rs 30 lakh for a 30-year tenure is just Rs 368 per month! Hence, for just 368 rupees more, the family of the policyholder will remain fully protected for the entire duration of the loan. So, while the principal amount of the home loan will progressively reduce every year, the sum assured of the term insurance plan will remain constant, providing incremental security to the family as years go by.