Home Loan Insurance Vs Term Insurance

Home loan insurance and term insurance plan both provide protection against the uncertainty of life, However, the intent of these two products are completely different. Home loan protection plan is specifically tied to your mortgage, with the payout going directly to the lender to settle the unpaid debts. Whereas, a term insurance plan offers a death benefit to your chosen nominees/beneficiaries, who can use the money for fulfilling various needs beyond the home loan. Let’s understand the difference between home loan insurance and term insurance:

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Home Loan Insurance

Opting for a home loan before buying a house is common as it comes with several advantages. But what if you face a financial crisis during the home loan tenure for any reason? It could be job loss, sudden death or disability, or any other financial emergency that might demand high expenses.

Such scenarios can even lead to missed payments attracting further penalties. Having home loan insurance helps during such a crisis.

A home loan insurance not only protects the lender’s interests but your dependents are also protected from any sudden financial burden. The insurance promises to repay the outstanding loan to the lender in case of unfortunate events during the loan tenure.

It is generally provided by home loan lenders with a single premium payment option. This amount is most likely added to the home loan amount at an additional cost. However, some lenders ask for a separate premium payment.

Even though a home loan insurance might look like an added cost, its benefits are important.

For example,
Rohit recently purchased an apartment in Pune after years of saving. To manage the cost, he took a home loan with EMIs stretching over the next 20 years. While planning his finances, he realised that the loan would still need to be repaid even in his absence. To avoid placing this burden on his spouse, he opted for a home loan protection plan. This ensured that his family would not have to worry about clearing the outstanding loan during an already difficult time.

Term Insurance

Term insurance or term life insurance is the most common type of insurance plan. They are pure protection plans with affordable premium rates offering coverage in case something happens to the policyholder during the policy tenure. Term plans offer a lump sum death benefit to the policyholder’s family/ nominee in case of the sudden demise of the policyholder.

If the policyholder survives the tenure, no benefits are paid. Term insurance also offers tax benefits of up to INR 1.5 lakh under section 80C.

Term plans are usually of a fixed tenure. If you survive the term, you can either choose to extend the same plan or buy another. You also have the option of converting the term plan into a whole life cover insurance to assure complete financial coverage. The sum assured of term plans can be used for fulfilling financial requirements like loan repayment.

For example,
Ananya is the sole earning member of her household and supports her parents while also saving for her younger brother’s education. Keeping her responsibilities in mind, she decided to buy a term insurance plan early in her career. The policy was chosen carefully to provide sufficient coverage for her family’s daily expenses and future needs. This decision gave her confidence that her family would be financially supported even in her absence.

Note: Know what is term insurance first and then buy a term plan for your loved ones.

Term Plans

LIFE COVER

₹ 1 Crore

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₹ 13/day⁺

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LIFE COVER

₹ 50 Lakh

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₹ 8/day⁺

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LIFE COVER

₹ 75 Lakh

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₹ 12/day⁺

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Understanding the Difference Between Home Loan Insurance and Term Insurance

Term insurance is different from home loan insurance as it offers overall coverage to the policyholder’s family. It is another way of ensuring that your loved ones don’t suffer a financial burden in case something happens to you during the home loan tenure.

Basis of Distinction	Home Loan Insurance	Term Insurance
Premium Cost	It requires a one-time payment. Premiums are comparatively higher.	Scheduled payments of lower value are made. Premiums are comparatively lower.
Life Cover	It covers the loan amount that has been sanctioned. As the loan is repaid, the life cover will decline and come done to zero at the end of the loan.	Term insurance is a cover that is payable on the death of the policyholder. They are used to repay the loans and act as an aid for the family in distress.
Modification of the Cover	The plan cannot be modified. If you opt for a higher tenure, the span for the home loan insurance remains the same.	In a term plan, there is an option to increase the cover.
Difference in Premium	The premium cost gets added to the loan amount, and the interest charged includes the premium paid.	The premium of a term plan is much more affordable as compared to the Home Loan Insurance.
Tax Benefits	The premium payments are added to the home loan amount thereby the tax deduction available under Section 80C of the Income Tax Act, 1961 increases. However, the period of the benefits shall depend on the period of the loan. (**Tax benefit is subject to changes in tax laws. Standard T&C apply.)*	Term insurance plan premiums are also available for tax benefits under Section 80C of the Income Tax Act, 1961. The period of the benefit can, however, vary. (**Tax benefit is subject to changes in tax laws. Standard T&C apply.)*
Add- Ons	The insurance plan comes with optional riders such as disabilities, terminal illness. The premium for the add-ons is comparatively on the higher side.	Recently term plans also offer additional covers/ riders for terminal illnesses like cancer, cardiac issues as well as disability.

Should I Buy Term Insurance or Home Loan Insurance?

Opting for any of the insurance covers is not mandatory but should be considered for additional financial protection. Term insurance is beneficial for a family’s financial independence, especially after the unforeseen demise of the only earning family member. Choosing between the two depends on the needs and circumstances of the individual in particular. A thorough comparison of your present situation along with probable risks should be done to arrive at an informed conclusion.

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What are the Benefits of Term Insurance Over Home Loan Insurance?

By comparing the benefits of term insurance over home loan insurance, you can figure out which of the two is the most suitable plan for you. Term insurance offers more flexibility, larger cover, and affordable premiums compared to home loan insurance plans. The purpose of a home loan insurance is to take care of the outstanding home loan in your absence, whereas the term insurance payout can help your family take care of their financial needs like paying rent, child’s fees, and remaining loans.

Note: You can calculate the term plan premium on the term insurance calculator online tool by Policybazaar.

Note: Check all the best term insurance plan in India.

Note: You should also check the benefits of term life insurance if you are planning to purchase the term insurance plan.

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What is Term Life Insurance

FAQs

What are the benefits of home loan protection plans?
A home loan protection plan has the following benefits:
- The premium payments are eligible for deduction under Section 80C of the Income Tax Act.
- In case of an unforeseen demise, the insurer repays the loan amount to the lender.
- The advantage of add-on riders can also be availed.
Is it mandatory to buy home loan insurance?

It is not mandatory to purchase a home loan insurance plan. However, it is advisable to buy the same for future security.
What is the difference between home loan insurance and term plan?

The difference between home loan insurance and term plan are as follows:
The home loan insurance cover might decrease to match your loan amount, but the sum assured of term insurance will remain the same.
The payout from a home loan insurance might go directly to the insurer, while the term insurance payout goes to your family in your absence.
Term insurance plans offer more flexibility at lower premiums, whereas home loan insurance plans offer lesser flexibility at slightly higher premiums.
Who should buy term plans?
The following category of individuals should buy a term plan:
- Parents
- Newly Married
- Young Professionals
- Taxpayers
- Retired
- Self Employed Individuals
- Working Women
What are the benefits of term insurance plans?
The benefits of term insurance plans have been listed out underneath:
- Security for Loans and Liabilities
- Critical Illness Cover
- Higher sum assured at affordable premiums
- Tax Benefits
- Disability Support
- Add on protection offers
- Death Benefits
- Maturity Benefits
- Survival Benefits
What are the payout options available in the case of term insurance?
The following payout options are available:
- Annual Payout
- Monthly Payout
- Lump-sum with increasing monthly
- Lump-sum with monthly income
How much term insurance cover do you need?
The following factors decide the amount of insurance cover you need:
- Current income and expenses
- Future financial goal for family and self
- Current and future liabilities and assets
What factors are to be considered before buying a term insurance plan?
The following factors are to be considered before buying a term insurance plan:
- Company reliability
- Claim Settlement Ratio
- Solvency ratio
- Coverage offered
- Premium waiver rider upon terminal illness diagnosis

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˜The insurers/plans mentioned are arranged in order of highest to lowest Sum Assured(SA) offered by Policybazaar’s insurer partners offering term insurance plans on our platform, as per ‘first year premium of life insurers as at 31.03.2025 report’ published by IRDAI.

Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. For complete list of insurers in India refer to the IRDAI website www.irdai.gov.in

Rs. 400/month is starting price for a 1 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

Rs. 400/month (Rs.13/day) is starting price for a 1 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 230 is starting price for a 50 lakhs term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

+Rs. 8/day is starting price for a 50 lakhs term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

+Rs. 12/day is starting price for a 75 lakhs term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

+Rs. 497/month is starting price for a 1.5 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 487/month is starting price for a 2 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 626/month is starting price for a 3 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 905/month is starting price for a 5 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. ₹361/month is the starting price for a ₹1 crore loan cover with an 8% interest rate for an 18-year-old male, non-smoker, with no pre-existing diseases, loan tenure up to 20 years, rounded off to the nearest 10

+Rs. 1,267/month is starting price for a 7 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

*The full refund of premium is available on availing the one-time option of refund of premium. Total premium paid for policy (paid for add-ons) will be the special exit value, payable on availing the one-time option of refund of premium if you wish to completely exit the policy.

+Rs. 447/month is starting price for a 1 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs.679/month is starting price for a 2 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 910/month is starting price for a 3 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 1,374/month is starting price for a 5 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 1,924month is starting price for a 7 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

Women

+Rs. 400/month is Starting price for a 1 crore term life insurance for an 18 year-old Female, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

Rs. 461/month is the starting price for a 1 crore term life insurance for an 24 year-old female, non-smoker, with no pre-existing diseases, cover upto 54 years of age.

1,642/month is the starting price for a 1 crore term life insurance for an 44 year-old female, non-smoker, with no pre-existing diseases, cover upto 74 years of age.

Prices offered by the insurer are as per the approved insurance plans | #All savings and online discounts are provided by insurers as per IRDAI approved insurance plans | Standard Terms and Conditions Apply | **Tax Benefits are subject to changes in tax laws.| Policybazaar Insurance Brokers Private Limited

We will respond in the first instance within 30 minutes of the customers contacting us. 30-minute claim support service is for the purpose of giving reasonable assistance to the policyholder in pursuance of the claim. Settlement of claim (including cashless claim) is the responsibility of the insurer as per policy terms and conditions. The 30-minute claim support is subject to our operations not being impacted by a system failure or force majeure event or for reasons beyond our control. For further details, 24x7 Claims Support Helpline can be reached out at 1800-258-5881

For more details on risk factors, terms and conditions, please read the sales brochure carefully before concluding a sale

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