EXCLUSIVE | Home Loan Insurance: What borrowers should know before adding it to their loan plan, explains Policybazaar's Vivek Jain

Vivek Jain of Policybazaar, speaking with ET NOW, explains what home loan insurance is and how it works. Usually structured like a term life insurance product, this cover is meant to protect a borrower’s family from the financial burden of outstanding loan liability in case of unexpected events. From premium structure and riders to whether it is actually needed, borrowers should understand the details before agreeing to add it to their home loan package.

If the borrower passes away before the loan is fully repaid, the insurance company pays the outstanding loan amount directly to the lender. This helps keep the house safe in the name of the family members and removes the pressure of continuing EMI payments.

Such insurance is often suggested when a long-term home loan is taken because repayment periods can stretch for many years.

The insurance payout is usually used to close the loan account. This prevents the family from facing legal or financial pressure related to the property.

However, the cover is generally limited to outstanding loan liability unless additional benefits are chosen.

Riders and Add-On BenefitsBorrowers can also choose optional riders depending on their needs. These riders are not part of the basic plan and must be purchased separately.

Common optional riders may include protection against critical illness, accidental death, or disability. Since these are add-ons, they increase the overall premium cost.

Many people mistakenly believe that disability or serious illness is automatically covered. In most cases, that is not true unless the rider is specifically selected.

If you already have a term life insurance policy that is large enough to cover your home loan liability, buying another loan-linked insurance plan may not be essential.

Standalone term insurance is often more flexible and sometimes cheaper compared to loan-specific insurance products.

However, if you do not have adequate life cover, home loan insurance can act as an additional safety net for your family.

Things to Check Before BuyingBefore finalising home loan insurance, borrowers should carefully evaluate a few important factors.

First, understand the premium structure and how the payment is to be made. Some policies require a single upfront premium, while others allow regular payments.

Second, check whether the coverage amount reduces as the loan balance decreases. Many home loan insurance plans follow a reducing cover structure.

Third, compare the cost of home loan insurance with standalone term insurance options to make a more informed decision.

Lastly, think about whether you actually need additional riders based on your health and financial situation.

A home loan is one of the biggest long-term financial responsibilities for most people. While home loan insurance can provide peace of mind, the decision should be taken after understanding all costs, benefits, and alternatives carefully.