The simple answer is, some of the home loan options, necessarily come with such insurance cover that are granted on a group insurance platform and borrower has no option but to avail it. And it is viewed as a safety guard by lending firms in addition to the regular due-diligence procedure they conduct before deciding on for the loan disbursal.
Why an insurance cover on home loan?
Such an insurance serves in the case when the borrower due to some unforeseen circumstance such as death fails to pay off the liability in total. And without the insurance scheme in place, the lender has full right to recover the outstanding loan amount by selling the home. And this situation could however be avoided with the insurance in hand as then the dues are then paid by the insurer.
MRTI or Mortgage Reducing Term Insurance Covers You Against Home Loan Default
In this insurance scheme, the sum assured offered is equivalent to the outstanding loan amount. So, as and when the EMI reduces over the repayment tenure, the sum assured also decreases in the same proportion. Herein the whole policy revolves on the premise to provide the borrower a cover in case he or she fails to meet the payment on home loan due to death.
In the schema of things, the insurer assigns a policy to the borrower and who after due-diligence includes borrowers within its net. The premium for these single-premium policies is sometimes included in the net loan amount borrowed and EMI is calculated accordingly.
Standalone or group insurance cover for home loan
Herein what experts decode is buying a standalone home loan insurance cover is a good option if you have the time and willingness to go through the underwriting process as else a group-insurance platform shall serve the purpose. Further, in case of huge-borrowings, make it a point to enhance the cover by buying additional standalone policy in case you just have the group insurance protection that is though deemed to not suffice.
And also, when you are reluctant to look out for the suitable standalone policy that fares well when it comes to pricing and other parameter, do certainly take the group insurance cover as it is surely a better deal that being without insurance and still having a huge liability as home loan repayment.