Protect Your Home Loan Investment: Ultimate Guide

Buying a house is one of the most significant financial investments a person would make. People keep a part of their earnings. However, the ever-increasing prices of properties make it a little difficult to buy a property solely through monthly income. In that case, a home loan comes out to be a viable option. For the most part, investing in homes is a decidedly risk-free investment. But it is not completely risk-free. The most significant risk for a home loan is the risk of repossession on failure to repay the home loan.

If this comes to be, you will lose the investment, adversely affecting your creditworthiness. It will become much more difficult to get funds for future investments. To protect yourself from these circumstances, you can get home loan insurance.

The Necessities Of A Home Loan Insurance

A home loan is a convenient and effective way to get funds to buy a house. At the same time, it is a liability that needs to be repaid. Failing, there is a risk of the home being repossessed by the lender. Thus, it becomes necessary to opt for home loan insurance when availing a home loan.

Home Loan Insurance: What Is It?

It is a term insurance scheme to ensure home loan repayment to the lender. The insurer and the home loan borrower are the parties to the insurance contract. The insurer undertakes to repay the home loan to the lender. But only in case the borrower fails to do so due to unforeseen circumstances. As covered in the terms of the insurance.

The insurer assumes this duty for a premium paid by the borrower. The insurance contract ends if the borrower fully repays the loan with interest. The insurer is then freed from the obligation. However, no part of the premium paid shall be returned to the borrower. The premium is a sunk cost when the insurer’s obligation is not triggered. Even so, there are several benefits of taking home loan insurance.

Read: Explore Home Loan Options & Property Registry Charges in Uttar Pradesh


  1. Repossession Risk: Home loan insurance eliminates the risk of repossession when the borrower cannot repay the loan due to death, disability, or terminal illness.
  1. Flexibility in Premium Payment: The premium is generally paid in a lump sum when entering the insurance contract. This is known as term insurance. The borrower can opt for instalment payments.
  1. Customisation: The insurance can be customised to protect the home and appliances. As well as the method and tenure to repay the home loan.
  1. Tax deductions: Similar to other types of insurance, the premium paid on home loan insurance is also eligible for deduction under the old taxation scheme under Section 80C of the Income Tax Act, 1961.

Things To Keep In Mind

There are two types of home loan insurance. Home Mortgage Insurance and Term Insurance for Home Loans. In the former, the insurer pays the remaining EMI payments directly to the lender once the insurance is triggered. While in the latter, the insurer undertakes to pay the sum assured to the borrower, which may cover the cost of damage caused to the home and the things in the home in addition to the loan repayment.

It is also important to ask the insurers about the add-ons for the insurance. Since the insurer’s liability is triggered only for the covered circumstances, it becomes necessary that a wide range of circumstances is covered. For example, unemployment or disability. Additionally, the borrower should try to get higher insurance coverage within their financial constraint. The borrower should also remember that the add-ons would increase the premium amount. This is why it is important to consult the representative of the insurer. And strike the perfect cost-benefit balance that suits each person.


Home loan insurance is gaining importance as a tool to save borrowers from losing ownership of their homes and protect lenders from default risk. Borrowers should opt for the add-ons that would give them maximum protection to ensure they are aptly covered.

Read Blogs: Demystifying Home Loan Processing Fees and Stamp Duty in Maharashtra

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