I was recently suggested to take up a home insurance plan by a friend. Is Home insurance the same as home loan insurance? Please clarify.
: A lot of people get confused between home insurance and home loan insurance. Home insurance and home loan insurance are two distinct products. Home loan insurance offers a protective cover for the home loan in case of the demise or permanent disability of the home loan borrower. In case you have taken up a home loan and are unable to repay the loan due to disability or death, home loan insurance pays the loan on behalf of you.
On the other hand, a home insurance policy offers protective coverage for the building structure and home valuables offering protection against damages caused by manmade or natural calamities like floods, rains, fire and theft. A basic home insurance protection offers a standard fire cover policy and burglary coverage. You can also take optional protective covers including protection against house break for valuable content.
Home Insurance and Home Loan Insurance are not the same.
Home Insurance products cover the structure of the property and content inside. The structure can be covered in three ways:
Covering the cost of construction excluding the value of the land
Covering the cost of the construction including the value of the land
Considering the cost of construction factoring in depreciation
The content inside can be insured in two ways:
Buying a cover that considers the value after depreciation
Buying a cover on a reinstatement basis
Home Insurance products typically cover losses from natural calamities such as earthquakes, lightning, floods and cyclones as well as man-made calamities such as fire, riots, violent strikes, theft and burglary. You can also opt for additional cover for jewellery, precious stones, and other valuables if lost due to theft.
Home Loan Insurance, as the name suggests, is an insurance plan intended to mitigate the risks associated with your Home Loan, which is a long-term financial burden. Home Loan Insurance works in a similar way to Life Insurance. The insurance company protects the insured by taking away his/her Home Loan liability in case of his/her loss of life or permanent disability.
The insurance company pays off the outstanding balance of the loan amount to the bank in such situations and thereby protects your family members from the burden of the loan. The sum assured here will not be a fixed amount. Instead, it will be the outstanding balance of the loan amount.
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