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Home Insurance vs. Home Loan Insurance

Owning a house of our own is one of our dreams come true. Generally, people avail of home loans from a financial institution or bank to build their dream house and to secure it financially; they buy a home insurance policy. However, homeowners usually need clarification on the two widely used terms during the purchase process: home insurance and home loan insurance. To help you, this article states the differences between home insurance and home loan insurance.

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Home Insurance Versus Home Loan Insurance

The following table represents the difference between home insurance and home loan insurance:

Categories Home Insurance Home Loan Insurance
Meaning It pays for the loss or damages if the house structure or its contents are damaged due to insured perils. It pays the remaining home loan amount of the insured if a mishap makes it impossible for them to pay off the loan.
Availability It can be purchased irrespective of regardless of whether you have a home loan. It can be purchased only if home insurance is available.
Down Payment No impact on the down payment. It reduces the down payment on your house.
Premium The premiums are lower than for home loan insurance. The premiums are higher as compared to home insurance.

Home Insurance and Its Benefits

Home insurance is a policy that protects your home and its contents from any unforeseen loss or damages. It covers expenses for renovating your home and repairing/replacing its damaged or lost contents. It safeguards your home and your personal belongings from any loss or damages arising out of unpredictable events. A house insurance policy provides protection against damages caused due to fire, theft, natural calamities and manmade disasters.

Broadly, a home insurance policy provides two types of coverage: structural and content damage coverage. Unlike the name suggests, structural damage offers coverage only if the structure of the house or building has been damaged. For example, the policy will cover the damages to the building structure during floods.

On the other hand, content damage cover provides financial aid for only the loss or damages caused to the contents of your home, such as the furniture, appliances, etc. For example, if the fire in your house destroys your TV, fridge, and furniture, the cost of repairing or replacing these items will be covered under the content damage cover.

Benefits of Home Insurance

Here are a few benefits of a home insurance policy provided to the homeowner:

  1. Both the homeowners (landlords) and tenants can purchase a home insurance policy.
  2. It offers all-round protection to safeguard your home against several unforeseen risks, including damages caused by natural calamities & man-made disasters.
  3. Somehome insurance companiesalso provide financial aid in case one of your employees or a third party person gets injured in your house.
  4. Similarly, if a part of your house falls into your neighbour’s car, crushing it to pieces during the earthquake, your insurance provider will pay your third-party liabilities.
  5. Home insurance plans are cost-efficient to secure the content & structure of your house.

Home Loan Insurance & Its Benefits

Home loan insurance is plan that covers your home loan liabilities if you cannot meet them due to an unforeseen event. It pays your monthly home loan installments (EMIs) if you can no longer pay them. It protects you from the risk of not repaying your home loan if an unpredictable incident makes it impossible to afford. Thus, a home loan insurance prevents you from losing the ownership of your house in case you default on your EMI payments.

It also comes to your family's rescue and pays your remaining home loan amount in case of your untimely demise.

The coverage of a home loan insurance plan may differ from one provider to another. Most insurers only cover the risk of repaying the home loan in case of the sudden death of the homeowner/ the borrower. Some insurers may also provide this cover in case the homeowner suffers from a critical illness, gets disabled or loses their job. Therefore, you must go through the terms and conditions of it before buying it.

The home loan insurance covers the shrinks as you repay your loan. This happens because your liability towards paying the home loan reduces with time as you pay your EMIs. For instance, suppose you have taken a loan of Rs 1 crore. If you have repaid the Rs 15 lakh, your home loan insurance will cover Rs 85 lakh. However, if you have repaid Rs 50 lakh from your home loan amount, you will get insurance coverage of Rs 50 lakh in case of any eventuality.

Benefits of Home Loan Insurance

  1. Here are a few benefits a home loan insurance provides to the borrower:
  2. The primary benefit of home loan insurance is assisting the borrower in retaining their property ownership even if the EMIs are not paid on time.
  3. It allows you to borrow a large sum while keeping the payments low.
  4. The premiums you pay for your home loan insurance are eligible for tax deductions under section 80C of the Income Tax Act of India.
  5. It also provides people with little savings a chance to buy a house early in life as the insurance company guarantees their loan repayment.
  6. It allows you to repay your home loan in one payment or through periodic instalments.

You may also read Is it Mandatory to Buy a Home Insurance Policy for Your Home Loan?

In a Nutshell

A home insurance policy protects you against any financial loss arising from loss or damages caused to your house structure or personal belongings. Home loan insurance prevents the bank from selling your house when you cannot pay your home loan. Both terms are different from each other but are extremely important. Home insurance is a must to avoid a significant financial loss, and home loan insurance is essential if you have an unstable income and are planning to take a home loan.

Written By: PolicyBazaar - Updated: 14 March 2024
Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.
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Reviews & Ratings

4.4 / 5 (Based on 120 Reviews)
(Showing Newest 10 reviews)
Virendra
Bokaro, July 26, 2022
Coverage for natural calamity
I was looking for an insurance policy that provides me coverage for natural calamity. Since my house is located near a river and it floods my area in the rainy season. So i went on the Policybazaar website and particularly look for this coverage found the exact plan that provides this coverage.
Sunil
Bilaspur, July 26, 2022
Premium Calculation
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Manish
Bikaner, July 26, 2022
Natural Calamity cover
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Amritsar, July 26, 2022
Enough coverage
I was looking for a home insurance plan online. I was fed up as i have to visit different websites to look for a single suitable insurance plan. However, i stumbbled upon Policybazaar website where i was able to find the right insurance plan that could provide me enough coverage.
Sahil
Bareilly, July 26, 2022
Nice customer service
I wanted to purchase a home insurance policy and a friend of mine suggested to purchase it from Policybazaar. I bought the policy and after that i had a confusion regarding exclusions so i called up Policybazaar customer care and they cleared out the confusion and i loved their customer service.
Jitendra
Ajmer, July 26, 2022
Qiuck claim
I purchased a home insurance policy recently. However, due to a natural calamity, my house was damaged as the pressure of the water because of flood broke the enterance door of my house. But the insurance plan that i bought got me covered and i as able to get the quickest claim possible.
Prashant
Delhi, July 26, 2022
Natural calamities covered
I bought a home insurance policy recently. As i live near a river and in the rainy season, my area gets flooded so in order to protect my house and its contents, i purchased the insurance to get coverage for such natual calamities and i am tension free now.
Sharad
Kolkata, July 26, 2022
Wide coverage
The home insurance plan that i purchased from policybazaar's website is a great plan that provides me coverage for not only the structure but also cover several expensive content of the home such as paintings, mobile phones, laptops, television, etc.
Ravi
Ahmedabad, July 26, 2022
Suitable insurance plan
I purchased the group health insurance policy from Policybazaar website. First of all, i did not have to wander much online while lookig for a home insurance plan that fits my requirement and i found the suitbale home insurance plan by comparing different plans on the website.
Yashashvi
Amritsar, June 09, 2022
Natural calamities covered
I bought a home insurance policy recently. As i live near a river and in the rainy season, my area gets flooded so in order to protect my house and its contents, i purchased the insurance to get coverage for such natual calamities and i am tension-free now.
  • Disclaimers+

    #Savings of 28% are based on the comparison between the highest and lowest premiums for a pucca building with sum insured of >₹ 1 crore at Delhi, for property age less than 5 years and policy term of 11 years.

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