Home loan: Beware the insurance agent

Buying a dream home is something which all of us desire. However, not many of us are lucky enough to have money to buy the home on a down payment and hence need a home loan. Taking a home loan is a tedious process where the lender checks your eligibility and then the credit history. All this takes time and when finally the approval comes, you are already tired. The papers you need to sign to get the loan are a whole bunch and it is a common practice to sign all papers without going through the details mentioned in the paper. One of the papers along with home loan documents is its insurance. Lets discuss what should be your approach while dealing with the home loan insurance.

Why home loan insurance
Buying a home on a loan entails a liability of paying back the loan. In case of your unfortunate death...during the pay term, you would not want your family to become homeless. A home loan insurance insures that the insurance company pays for the balance amount, should something happen, to you.

How does it work
Suppose you take a home loan insurance policy for Rs 25 lakh and in the next 5 years you pay about Rs 5 lakhs. Unfortunately, if something happens to you and your family is unable to repay rest of the 20 lakhs outstanding then the home loan lender is in full right to sell off your house and recover rest of the amount. However, if you have a home loan insurance policy, it will take care of your balance amount of Rs 20 lakhs that you need to repay. You can choose the coverage of a home insurance policy between a reducing balance or on a flat basis.