Home Loan Insurance & Protection Plan का असली सच - YouTube

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Namaskar, my name is Mukul and welcome to Asset Yogi.

Where we do not lock but unlock the knowledge of finance.

In this video, we are going to talk about home loan insurance.

Many subscribers have also asked about the same.

Whenever you go to buy a property,

there are high chances that you will also take a home loan for the same.

Most of the residential properties are bought along with the home loan.

But now when you go for a home loan, you get a bumper suddenly

as a bank executive says "you have to take home insurance as well"

means which will cover the liability of a home loan.

So most people do not understand home loan insurance that why exactly is it?

And why do I have to pay the extra money?

So, in this video, this is what we are going to see

that what exactly is home loan insurance?

How does it work?

And along with that, we will also compare

that if suppose you already have a term insurance

so is it cheaper?

Does it cover home loan liability or not?

We will understand all this by calculations.

So do watch this video from the start to the end

because in the end, I m going to share some tips

related to home loans and term insurance.

Let's go straight to the blackboard.

So let's first understand what basically is home loan insurance?

Home loan insurance is what we also call a home loan protection plan

It covers your home loan liability

Let's suppose if you've taken a home loan.

Let's suppose you bought this property for 50 lakhs

and let's say you took a home loan of 40 lakhs, right.

So this home loan of 40 Lakhs, Let's say if you've taken it for 20 years

and during these 20 years, if you have an untimely death

So, in that case, it covers for you.

All the leftover loan payments will be done by the insurance company.

So, your family doesn't have to vacate the house.

And a liability will not come on them.

All the loan will be paid by the insurance company.

So, this is what we call a home loan protection plan.

So, what happens in this is the policy term becomes equal to the loan tenure.

If suppose you've taken a loan for 20 years.

So this will become the tenure of 20 years for the policy as well.

So whatever the loan tenure is left,

the same is the tenure for home loan insurance.

In this, you generally get 2 options.

One is reducing cover.

Reducing cover means as your loan decreases

Like it's 40 Lakhs now

maybe it will be 35 Lakhs after 5 years.

After 10 years, maybe it will be 27-28 lakhs.

So whatever will be the outstanding amount

let's say after 10 years, it has been reduced to 27 Lakhs.

So after 10 years, payment will be made of 27 lakhs only.

That's what we call reducing cover.

So, let's take an example of reducing cover

Let's suppose your age is 28 years

you can be of any age, here we are just taking an example

So if you've taken a loan of 40 lakhs

interest rate is 8.5%

and you take this loan for 20 years

so your EMI will be around 35 lakh rupees.

And in this case, your reducing cover premium under home loan protection plan

will be Rs. 375 per month.

Now, here I've written the premium per month

generally, it is a one-time single premium. Right?

If you pay a single premium

then it maybe is around 70,000 to 1 lakh.

If you do the upfront payment. If you pay at a single shot.

Otherwise, If you want to pay per month

then you have to pay 375 rupees per month.

So, you have both options.

Whichever suits you.

If suppose you want to pay a single premium

then you can give this together.

Otherwise, it is added to your loan and in your EMI.

Let's say here your EMI was Rs. 34,713

so your EMI will become a total of around Rs.35,100

if you choose the per month option.

The second option is of fixed cover.

In fixed cover, if you take a cover of 40 lakhs

So, it will be fixed at 40 lakhs for 20 years.

So whenever you die, your family will get full 40 lakhs.

But it is more expensive.

In this case, it may happen that instead of 375, your premium becomes Rs. 800 pm.

So that's why it is a bit expensive.

Now, we will see the 2nd option of term insurance.

That how much cheaper or higher it is from reducing cover or fixed cover?

First, let's understand about the home loan insurance.

So what do banks sometimes do?

They push the home loan protection plan with the home loan.

So, whenever you buy a home loan, they may say this is mandatory.

So, how to deal with that?

We will talk about that in the end.

And home insurance and property insurance are different things.

A home loan protection plan or home loan insurance is a totally different thing.

Property insurance or home loan insurance

is basically your property insurance

if there's any structural damage

or any fire, earthquake, theft occurs

or have anything in the house it is insurance for that.

That we call home insurance or property insurance.

A home loan protection plan only covers your home loan.

It doesn't cover the property.

So, the home loan protection plan only covers the home loan liability.

So keep this thing in mind.

Do not confuse with this thing.

So, this is mainly your home loan insurance.

Now, let's see what's its calculation with the term insurance?

Is term insurance cheaper or expensive?

Let's take the same example.

Let's say you've a loan of 40 lakhs, 8.5% is the interest

you have taken the loan for 20 years.

And your reducing cover premium is Rs. 375 p.m.

Let's say in fixed cover case it could be 800 p.m.

If you take term insurance of 40 lakhs for 20 years.

Let's say you take a sum assured of 40 lakhs and you are 28 years old.

we are taking the same example.

So first thing, in term insurance you will get all the sum assured.

Like here it is 40 lakhs.

As you are getting in this fixed cover all the 40 lakhs

in this also you will get all 40 lakhs for 20 years, right.

It doesn't depend on your loan.

Now, term insurance premium, in this case, will be

it will be around 360 per month.

This can vary too.

I've calculated it currently.

I've taken the minimum from the comparision site.

So, it is Rs.360 p.m. You can also calculate it.

But generally, it will be lower than the reducing cover.

So you can see... If we do a comparison between the three

so fixed cover is already very expensive

And all the benefits of the fixed cover

because in this also you are getting a cover of 40 lakhs for 20 years, right.

And here also your are getting a cover of 40 lakhs for 20 years

but here you've to spend less than half the price.

And here, in reducing cover, you have to give Rs.375 p.m

Now I would say both are equal but your cover reduces in this case.

How much does it reduce?

Let's see an example for that.

Let's suppose, in any case, you die after 5 years

or whoever this person is

if he dies after 5 years

then his outstanding loan will be Rs.35 lakhs.

So reducing cover will only cover the outstanding loan.

So the family will only get Rs. 35 lakhs.

And if we talk about the term insurance.

So the family will get 40 lakhs. Right?

After 10 years, they will only get 28 lakhs.

And in the case of the term insurance, here also they'll get 40 lakhs.

After 15 years, they will only get 17 lakhs. Right?

And here, 40 lakhs is fixed. Right?

So see, If it's a liability of 17 lakhs

so this remaining 23 lakhs

family can use this in any way.

Let's suppose if they want household income

then these 23 lakhs can be very useful for them.

So see, first thing, term insurance is cheaper, right.

It is cheaper.

After that, family is getting flexibility that if they get extra money, they can spend.

And the third thing, it is not only covering the home loan liability

Let's say the family gets 40 lakhs.

Then they can finish the other liabilities in any way.

So, this is the advantage of term insurance.

So, let's do a quick comparision between home loan insurance and term insurance.

What are the other similarities and differences?

Let's first talk about similarities.

So, in both, home loan protection plan and term insurance you get tax benefits

under section 80C

So whatever is your premium

so if you pay the premium yourselves

See, in term insurance, you yourself are paying the premium, right.

whether it is monthly or annually, whether you pay a single premium.

But in the HLPP case, there's a division

You'll get the tax benefits only when you are paying a single premium, right.

Because in that case, you'll directly pay the single premium to the insurance company.

But if you club it with the bank's EMI

then you'll not get the tax benefits.

Or if it's being clubbed with the EMI

then the bank should give you a receipt for the premium payment

If you do not get the receipt of premium payment,

then you won't get the benefit under 80C

so do keep this thing in mind.

Now, if you pay an additional premium

in both cases, you can take additional riders.

Like you can get a rider for critical illness,

for accidental death or any disability

all these riders are available for both the cases

whether you take home loan insurance or term insurance.

Now, let's talk about the differences.

When is term insurance better than HLPP?

Means when it is better than a home loan protection plan?

First thing, home insurance is cheaper, so definitely it is better.

This covers all your liabilities.

HLPP is only covering home loan liability, right.

This we've already talked about.

Now, in term insurance, you get more flexibility.

Your family can decide how to spend the money.

As we've taken in our example.

If the family gets 40 Lakhs, then they can decide

whether they want to pay the home loan or the kid's fees

or they want to use it in the household income.

You get this kind of flexibility, right!

But in a home loan protection plan, you'll only pay the home loan.

You can't pay any other thing than that.

Where HLPP is beneficial than the term insurance?

Where does it score better?

Let's suppose you have a joint home loan.

So in that case, if you take one home loan protection plan

then it will cover all the borrowers.

You have to buy separately in the case of term insurance.

So this joint home loan is the particular case

where this Home Loan Protection Plan can benefit a little.

Let's assume it's Rs. 375 p.m.

So, if two people, husband and wife, have taken a home loan

so it will cover both.

Otherwise, you would have to take two-term plans.

Right?

So in the case of a joint home loan, there is little advantage.

Now, let me share some tips.

First of all, if you have any kind of liabilities or loan

whether it is a personal loan, credit card debt, home loan, car loan

So first thing, you must take insurance cover.

Otherwise, your family can be burdened too much.

Bank will do its recovery by auctioning the assets.

But the family can have a lot of problems.

They can be thrown out of the house.

They may have to leave the car.

Or there will be no household income.

So first thing, it is a must to buy an insurance cover.

Now, if you haven't taken a joint home loan

then definitely, you should buy term insurance.

And term insurance is so must that you should take it in every case.

Even if you do not have any existing liabilities now

in future, you'll be having liabilities.

But if you take term insurance beforehand, when your age is less,

then you'll have to give very little premium. Right?

So If you have not taken term insurance, then you should get it as soon as possible.

Because it is the cheapest insurance and second, you get more flexibility in it.

Third thing, a home loan protection plan or home loan insurance is not mandatory.

Maybe a lot of banks sell it as mandated.

But is it not mandated.

There's no RBI's guideline for that.

Nor any IRDI's guideline.

It is not mandated in any way, under any law.

If you already know, if you are aware of home loan

So whenever you are negotiating for a home loan in the initial stages

If you haven't paid the processing fees then negotiate it in advance.

You tell the bank that I do not want to take the insurance

I've already taken term insurance.

And I don't have a requirement for that.

If you haven't taken term insurance then do buy the term insurance parallelly.

If you want to take any home loan.

Still, if the bank executive insists too much

So ask them to show the bank policy in writing.

In general, there is no such policy of any bank in writing.

But if so, then you must see that policy in the writing.

Many banks have policies that they do mandatory home insurance, right.

As I have told you home insurance is not home loan insurance, right.

Home insurance is when the property is insured against natural calamity or theft.

Its structure is insured.

Or the furniture or electronic items inside. Right!

So home insurance and home loan insurance is not the same.

So do read it carefully. Whatever is the policy of the bank.

Mank banks do make home insurance compulsory.

But the bank does not make home loan insurance compulsory.

And by chance, if the bank insists too much,

then you can negotiate with other banks too.

And lastly, even if you have to buy the policy

then you definitely have the option

there's a free-look period of 15-30 days of every policy

you can return that policy too.

I've covered all the major points related to home loan insurance in this video.

I hope that you would have understood the concept well.

And how the term insurance is compared with it.

If you haven't bought term insurance yet, then do get one today.

Even if you don't have any liability now, still, you must get term insurance.

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So that they can also get the benefit of this video.

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till then keep learning, keep earning and be happy as always.