Taking a home loan? Don't forget that insurance cover

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Taking a home loan? Don't forget that insurance cover

When you take a loan, do review your insurance covers. Repayment of loan even when you are not around, will ensure that your family get peaceful enjoyment of assets you built using the loan


Home loans and education loans are treated as good loans by many individuals. Though they are cheaper than personal loans, they tend to have a longer repayment tenure. No wonder, the lenders want to be on the safe side. In addition to the regular due-diligence, borrowers are generally asked to buy life insurance policies. It is in the interest of the borrower to buy life cover. If you have taken a home loan and you die before repaying it, then the bank has the right to recover the money by selling the house. Such a situation can be avoided by taking life insurance.

However, many times, borrowers are offered life insurance on a group insurance platform that pays the outstanding loan in case the borrower dies before repaying the loan. To enhance the protection, now borrowers also have the option to supplement the life cover with an accidental disability and critical illness cover.

Should borrowers go for such covers on group life platform or should they stick to their good old standalone covers?

Before we get into the specifics, let’s understand how these products- popularly known as Mortgage Reducing Term Insurance (MRTI) - work. The sum assured offered by this product mimics the loan outstanding in the tenure of the loan. As you repay your equated monthly installments (EMI), the loan outstanding keeps on falling and so does the sum assured. The idea is to pay up the loan in case of death of the borrower.

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