Term Insurance Plan how to help you, also with your home loan? Financial planning is not only important but it is quite evident that it helps in securing one’s future.
Overview
Purchasing a new home can be intimidating at the start but fulfilling when you finally get the possession. Also, while applying for a loan, getting approved, making the upfront payment; and, slowly paying the same off in the form of EMIs seems like a sorted plan, things take a turn for the worse; if the sole bread-earner of the family passes away or meets with an accident, leading to a permanent disability.
In case something like this were to happen, the concerned lender doesn’t simply waive off the loan amount. Instead, the next of kin needs to take responsibility for the payments; which might be hard if a permanent source of income is missing.
This is where a term insurance plan can come in handy as it would empower the family to pay off the loan amount in full; and, still consider staying in the house that the head of the family selected for them.
How Home Loans and Term Insurance Plan are linked?
Simply put, a term plan ensures that your family can pay off the remainder of the home loan amount, i.e. the liable principal, in your absence. As a term policy expect to take care of your family’s financial burden, pairing one with the home loan sounds most appropriate.
What is the Right Term Plan Value?
Before you go about purchasing term life insurance for your family; you need to use a term plan calculator to zero in on the right amount, whilst including the home loan liabilities. For instance, if you have taken a loan of say 40 lakhs for a period of 30 years; the plan calculation should include the home loan amount as well, provided you end up getting one alongside the home loan.
From a more calculative point of view, a comprehensive term plan abutting a home loan should be at least 15 times your present annual income plus the entire home loan value. This coverage amount expects to handle most of the familial liabilities in due course.
Things to note before purchasing a Term Plan
In case you plan on purchasing a term plan for covering the home loan payouts in the future; you must be mindful of the following aspects:
Insurer Credibility
You would want to purchase the plan from an insurer that boasts over 98 percent of the term insurance claim settlement ratio. This helps avoid hassles and delays upon your demise or disability.
Riders
Death isn’t the only blight to account for. You might even reach paralyze, which would still put the same burden on the family. Therefore, it is necessary to purchase a time plan that helps you pair riders along the way.
Home-Loan Linked Plans
If you already have a term plan, you are better off adding a home-loan rider to the same or purchasing a separate home-loan-linked plan where the premium decreases as you keep paying the premiums.
Final Words
Financial planning is not only important but it is quite evident that it helps in securing one’s future. While a term plan doesn’t directly contribute towards your home loan liability reduction; except for the taxes that it might help you save; it works as an additional line of defense that your family would need in case of an unfortunate incident. Purchasing the right plan can be a tedious task but one should always compare several options before making any decision.
