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Is Home Insurance mandatory with Home loan

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Is Home Insurance mandatory with Home loan

Last updated: January 25 2014
26 | Posts
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  • #21

    #21

    Re : Is Home Insurance mandatory with Home loan

    Dear Mr. Ashok,
    Thanks for your invaluable I/p..
    The DSA of the Loan providing agencies make the customer gullible and take them for riding by cross selling their schemes like this more over they give little knowledge of the utility of the insurance policy.
    Home loan policy without any return is just like diminishing return over period of time and its always wise to make our own calculations for covering the risk,so at any day best thing is to go for term insurance (and not home insurance owing to following benefits:-
    Flexibility to use the amount in case of casualty
    Flexibility to decide to divest from property and still have cover for larger benefit.
    Flexibility to make risk cover any amount to avoid volatile interest rate and hence cost of property which any ways is fixed cover given by both-term & home insurance
    Flexibility to have best Term policy available in market.

    1) Term insurance cover remains constant for the entire period.. While after each EMI, the housing loan cover reduces. Although the insurance companies claim that they take care of this difference by reducing the premium amount, but if you do the maths and take into account that the insurance premium increases as you age, you will find that the deal is not good enough.

    2) Interest Rate fluctuation: Rise of even 0.5% of interest rate would increase the EMI term for additional year, however this insurance does not give you any insurance cover for those EMI. On the other hand if the interest rate falls and the period of the loan gets reduced, the refund from the insurance premium is minuscule. (thanks to their service charges.)

    3) Foreclosure: Most of us agree that even though we take a housing loan for 15-20 years, there is always a chance that we will have to foreclose… Reason could be because you have made enough money to pay of the loan dues and save on interest, or because you want to sell the house (move to a different city/bigger place) or you might to switch the loan from one bank to another… In event of foreclosure, the home loan insurance is void.

    4) Full fledged term insurance gives you an opportunity to have all the additional extra benefits like disability, critical illness etc… which are not covered in the home insurance.

    Hence, although I strongly recommend a person to go for a insurance the moment he takes up a long term financial commitment like housing loan (or marrying and promise to pay the wife’s shopping bills), its best to make it a plain vanilla term insurance rather than an exotic scheme like this. This scheme might look cheaper on the first glance, but due to limited benefits, it only reduces the flexibility.


    Originally posted by amit2222 View Post
    Ashok4814,


    Any day, term plan is better than home insurance plan. However, bank would force you to take home insurance from the same bank as they have tie ups with an insurance company/agent (or have their own company).

    There are term insurance plans which will return all the premium paid by you after the policy ends. So you don't end up loosing money for insurance needs while covering the risk involved by increasing your debt liability (as a loan taker).

    The other major difference between term plan and home insurance plan is that term plan is for a specific yet fixed sum assured amount (say 20 lacs). And the sum will remain fixed for the entire period of policy (say 20 years). But home insurance works on diminishing or reducing sum assured in relation to your outstanding loan amount (check the attached picture).

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    • #22

      #22

      Re : Is Home Insurance mandatory with Home loan

      Anybody talked to axis bank regarding making axis bank the nominee in term insurance plan

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      • #23

        #23

        Re : Is Home Insurance mandatory with Home loan

        just found out insurance is not mandatory in axis, after possession it is compulsary

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        • #24

          #24

          Re : Is Home Insurance mandatory with Home loan

          Originally posted by vsangal View Post
          just found out insurance is not mandatory in axis, after possession it is compulsary
          Hi vsangal,
          Could u share this evidence with us...even could drop me line.
          Since we are being forced to do so..at time of possession we can certainly go for Term Insurance...in whichever firm we feel..

          Thanks in +vance

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          • #25

            #25

            Re : Is Home Insurance mandatory with Home loan

            Originally posted by ashok4814 View Post
            Is home loan manatory with home loan. Actually i have applied for a loan from IDBI bank, before approval the loan they are assisting me to take home insurance. they are saying it's mandatory. IS IT SO?
            no its not mandatory...try out some other banks too...

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            • #26

              #26

              Re : Is Home Insurance mandatory with Home loan

              SBI Max gain plan is the best if you get it in some how.

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              • #27

                #27

                Re : Is Home Insurance mandatory with Home loan

                Hi Folks,
                I faced some issues while taking loans.Please suggest :
                1) I took a home loan of 37 lacs from Axis through DSA. ROI is 10.25%.
                -The address mentioned is wrong so when can i apply for change of address and how?
                -Is there any charges Axis will charge for the same?How many days it will take now?
                -Will they send all the docs to my new address?How much it will cost me?
                2) While disbursing the home loan,they forced me to take life insurance cover and property insurance.
                Since i was closing the deal, so i took that.
                Is there anything i can do to cancel these?How much charges it will take?
                3) How can i claim benefit in income tax for the same.
                4) I have taken personal loan from ICICI bank and processing fees was 0.8%.Is it Ok?

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