At some point in life, we all aspire to buy a house. As easy as it might sound, buying your dream house involves years of hard work, effort, patience, and savings. Buying a house is surely a dream come true.
That feel of calling a place your own space. It is special, unfathomable, and certainly the feeling of a lifetime. To secure the house it is suggested to buy a home insurance policy
There are times when people also take a home loan from a bank or any financial institution. Taking a home loan is an ideal way to afford your own space and not compromise on other essential expenses. However, the home loan EMIs need to be paid timely.
People often tend to get confused about these two terms- home insurance and home loan insurance. In this article, let us discuss understand the differences between home insurance and home loan insurance.
What is a Home Insurance?
A home insurance
policy secures the home and its content from any unforeseen damages or loss. It protects the house and personal belongings from any damage/ loss that may arise due to natural calamity, man-made calamity, theft, etc.
When we talk about a house insurance policy generally provides content damage cover and structural damage cover. Structural damage covers ensure that financial assistance will be provided only if the house structure has been damaged. On the other hand, content damage cover offers financial support for the loss/ damage caused to the content of the home. The damage could be to furniture, any electrical appliance, etc. The repairing expenses are mostly covered under this cover.
House insurance can be purchased by both a house owner and the tenant as well. It is to be noted that a tenant will only be given the content damage cover as they are not a person who owns the space.
What is a Home Loan Insurance?
A home loan insurance covers the liabilities of the home loan. It happens when the borrower is unable to pay because of any adversity. It means that the installment of the monthly home loan is paid when the borrower is unable of paying the same.
It safeguards from the peril of not repaying the home loan in case an unexpected circumstance makes it impossible for the person to afford it. All in all, a home loan insurance policy prevents losing house ownership in case the EMI payments are not duly paid. It acts as a rescue to the family and pays the remaining amount of the home loan in case of adversity.
The home loan insurance coverage will vary from one provider to the other. Some insurers cover the repaying risk of a home loan when the borrower or homeowner passes away. Some insurers would cover it when suffering from any of the critical illnesses, getting disabled, or losing a job. No matter what, the terms and conditions of the plan should be read carefully.
The premiums that are paid towards the home loan insurance are entitled to tax deduction under Section 80C of the Income Tax Act. It also helps to reduce the down payment amount if the home loan insurance policy is taken.
A home loan insurance policy is ideal for those individuals who have little savings and wish to buy a house at an early stage of life. It is so as the repayment of a loan is guaranteed by the insurer. A home loan insurance policy also gives the option to repay the home loan either in a single payment or via installments periodically.
Disclaimer: The tax benefits are subject to change as per the existing laws.
Key Differences- Home Insurance vs Home Loan Insurance
The table below briefly shows the key differences between home insurance and home loan insurance:
Home Loan Insurance
||Compared to home loan insurance the premiums are low
||Compared to home insurance the premium is high
||It can be availed irrespective of whether you have home loan insurance or not
||It can be availed only if home insurance is in place
||No impact on the down payment
||Helps to reduce the down payment of the house
The Bottom Line
A home insurance policy secures against any monetary loss that may arise due to loss/damage caused to the structure of the house or personal belongings.
A home loan insurance will prevent the financial institution/ bank from selling the house in case the borrower is not able to pay the home loan. The terms are varying for both yet important. The key takeaway is that home insurance coverage will not let us go through financial stress. And anyone who has plans of taking a home loan may consider opting for home loan insurance.