Loan insurance when shifting loans


If i shift my home loan to a different bank what happens to my loan insurance


Taking an insurance cover for your loan is a good idea provided you are well aware of the details. Everyone likes portability and should you choose to shift your home loan to another lender your insurance may not remain valid. Check on the details of insurance validity in the event of loan transfer upfront before saying yes to a loan protection plan.


Does loan insurance charge a same premium for the full tenure? What if I need insurance on another loan?


No loan protection plans are reducing in nature the premium you will have to pay will depend on your loan amount, your age, medical history amid other factors. Also taking loan insurance against multiple loans is not very pocket friendly. If you take a loan protection plan against your car insurance today and you plan to opt for a housing loan in a couple of years you will have to spend an extra premium to opt for a home loan protection plan.


Hi Sohini,

A Home Loan insurance plan is a scheme under which the insurer will settle the outstanding loan amount with the lender or the bank in case of an unforeseen situation. Some of the comprehensive Home Loan insurance plans offers cover for the applicant, the house, and all its contents. The premium that is paid towards Home Loan insurance comes with tax benefits.

Most of the Home Loan insurance schemes offer reducing coverage with them. The size of the coverage is linked to the loan outstanding. Thus, the sum insured goes down when an individual repays the loan amount. However, in case of a term insurance, coverage stays the same. In case of term plans, the sum assured is received by the nominee who can make the payments to the lender or the bank for settling the loan. In case if a home loan insurance plan, the insurer directly makes the payments for the home loan outstanding to the lender for settling the loan.

Home Loan insurance can be purchased either from a general insurance company or a life insurance company. The ones that are offered by the general insurance companies need to be renewed on an annual basis. The policies offered by life insurance companies are for longer terms.
Most Home Loan protection plans are all single premium policies. This means you have to make a payment for the premium only once. As the amount of the premium is pretty high, lenders often add the premium amount to the loan amount. The borrower pays the premium along with the equated monthly instalments. For example, if you borrow a loan amount of Rs.30 lakhs and the Home Loan protection that you opt for costs Rs.1.5 lakhs, you will have to pay your EMIs for Rs.31.5 lakhs.

Usually there is a single policy for a single loan. So, if you need insurance for another loan, you will have to get a policy for that loan.

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BB Expert