In the event of any unlucky event, insurance policies assist one in securing one’s liabilities. Nowadays, homebuyers are urged to purchase homeowner and mortgage insurance. Even though both insurances have similar names, they have different functions.
We examine the variations between the two.
Knowing How To Use Home Insurance
Home insurance typically consists of two parts: one that covers the building and the other that covers personal property like furniture and electronics. One can obtain home insurance coverage for fire and allied perils, such as lightning, storm and flood, and earthquake, depending on the type of insurance. Additionally, house insurance is available for break-ins, damage, and mechanical or electrical failure. *
Home Insurance Policies Come In A Variety Of Forms
- Standard Fire & Allied Perils Policies: These provide home fire insurance for risks associated with fires. It also protects when the property is vulnerable to riots, floods, and storms.
- Burglary & Housebreaking Insurance Policy: It covers the loss of current assets due to theft or burglary.
- All Risks Policy: Any valuables are protected by this.
Who May Purchase Home Insurance?
Renters and property owners can both purchase house insurance. However, because it is a rented property, tenants can only insure the contents (valuables), not the building itself.
Understanding Home Loan Insurance
The mortgage insurance covers the outstanding loan liability of a borrower. It is helpful in unfortunate occurrences like loss of income or the passing of the EMI payer. The insurance provider will pay the bank’s outstanding debts in such cases.
First and foremost, this is a loan insurance, not a home insurance. As a result, only your mortgage is secured. You will still need to insure your house. You will also need to pay a premium for this, just like you would for your home or auto insurance. Your age, the loan term, the amount, etc., all affect the premium.
Under Section 80C of the Income Tax Act, you may deduct the premium cost if you pay it out of pocket. However, you cannot make any deductions if your lender pays the insurance premium (making it a part of your loan). **
It’s crucial for homeowners to understand the key distinctions between home insurance and home loan insurance. Home insurance is primarily designed to protect your property and personal belongings from a range of risks, including natural disasters, theft, and accidents, providing financial assistance to repair or replace damaged items. On the other hand, home loan insurance, also known as mortgage insurance, primarily safeguards the lender’s interests by ensuring that the outstanding home loan is repaid in the event of the borrower’s passing away or disability. While both types of insurance serve important home insurance benefits, homeowners should recognise that home insurance is essential for safeguarding their investment and personal property, while home loan insurance benefits the lender by ensuring loan repayment. It’s advisable for homeowners to have a comprehensive home insurance policy to cover their property and a separate life insurance policy to protect their family’s financial well-being.
*Standard T&C Apply
**Tax benefits are subject to change in prevalent tax laws.
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.