We all love insurances. After all, they offer assurance of safety against the unpredictable events of life. However, sometimes, insurance policies can sound the same, be completely different, and cause much confusion. Two such policies are home insurance and home loan insurance. Let’s find out the differences.
Understanding each of the two terms
Just like its name suggests, a home insurance protects your home and your other belongings that are stored within its four walls. Say, for instance, you suffer damage to your property and end up losing appliances and furniture due to an unfortunate event; you can claim your home insurance money to cover losses incurred in the process. Now, the extent of the coverage will depend upon your policy. On average, most home insurance policies cover damage suffered due to hail, fire, thunderstorm, and theft. Besides losses incurred, costs associated with maintenance and repairs such as that of wall fixtures, garages, etc. are also covered.
Another name for a Home Loan Protection Plan (HLPP), a home loan insurance, again as its name suggests, offers protection on the housing loan availed for the purpose of home purchase. Under such a policy, the insurance provider promises to settle any outstanding loan amount in case the borrower is unable to repay it or dies suddenly. This policy assures the housing loan borrower that his family will not be evicted due to failure to repay the loan.
Spotting the differences
Yes, both are insurances; yes, both sound similar, but one will not serve the purpose of the other! Given their difference of nature, a home insurance will offer you no respite if you start defaulting on the EMI payments of your housing loan. Similarly, a housing loan insurance will not come to your rescue if your home suffers theft damage or gets burned down. Therefore, you need to choose a policy wisely.
Which of the two is better?
Now, despite both being a highly useful policy, which one is better for you will depend upon whether you’re currently repaying a home loan or not. If yes, then taking a housing loan insurance is extremely crucial, especially if your income is unstable. This not only makes the lending less risky for the lender, but it also assures you of proper coverage should you be unable to repay the full amount in the future.
However, even while you’re repaying your housing loan, taking a home insurance can also be beneficial as it is a useful policy that protects your home from unforeseen events. And since such events happen without prior notice, you never really know when you may stand in need of funds. Who wants to lose the precious property they worked so hard to possess!
Are you among those just starting out with a housing loan? Then, be sure to choose a lender wisely – compare home loan interest rates, check your eligibility, gather all proper documentation, and only then apply online.
Also, don’t forget to check your affordability by using a simple online tool such as the home loan EMI calculator. Getting a housing loan insurance is good, but planning ahead and ensuring a smooth repayment experience is better!