Home Insurance vs. Home Loan Insurance

Home Insurance Versus Home Loan Insurance

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