Buying a house is not just a financial milestone - it is the culmination of dreams, happiness and success. This is why a home is so precious. It offers a roof over your head and it also works as a wonderful investment. However, the vast majority of people buy homes with the help of home loans. Whether they buy land to construct a home, buy an apartment or buy an old house and renovate it, loans are commonly taken by almost every homeowner. It is also very important to take a term insurance plan along with the home loan as the policy helps to protect the family of the policyholder if he or she dies before repaying the loan. Take a look at this article to know why it is so important for homebuyers to get term insurance and what can happen if the plan is not taken.
Reasons Why Term Insurance is Important for Home Buyers
A term plan works under a simple principle - if the policyholder dies within the policy period, his nominees receive the death benefit. A homeowner should thus buy term insurance for the duration that is equal to that of the loan period. If he dies in that period, his family can use the sum assured to clear the loan. Below is a detailed explanation as to why it is so important for everyone to get a term plan when they opt for a home loan to get their dream house:
- Helps Clear Dues -
The biggest advantage is that it helps your family to clear all the dues from the loans and mortgages when they receive a large sum assured from the term life insurance plan after your death. In the absence of this sum, and also in the absence of your income, they can struggle a lot to pay the EMIs on time. It may burden them tremendously and they will end up in a financial mess.
- Protects Property -
When you bought the house, you wished for your family to have a safe roof over their heads. But what happens when there is loan default? Yes, you guessed it correctly - eventually, the property gets seized by the lender after the occupants are evicted. Can you imagine the pain and trouble your loved ones, including your spouse, kids and parents can face if the house is taken away from them? To prevent any such situation from arising, get a term insurance plan as soon as you buy the house. If you die before clearing the dues, your family can clear the loan after your demise with the help of receiving the death benefit and have a roof over their heads forever.
Other Benefits of Term Insurance
Apart from these benefits received by the family of a policyholder after his death, there are some very handy benefits that the policyholder can enjoy while he is alive. They include:
- Tax Benefits -
When you buy term insurance, you get several tax benefits. First and foremost, you get an income tax rebate of up to INR 1.5 lakhs a year for the premium you pay for your policy, under Section 80C of the Income Tax Act. Then, if there is a health component added to your plan, such as a critical illness rider, you get a tax benefit under Section 80D of the Income Tax Act. And finally, when your nominees receive the death benefit, they get the amount in a complete tax-free manner under Section 10(10D) of the Income Tax Act. These are all very beneficial indeed.
- High Cover at a Low Price -
Another benefit is that you get a high life cover at a low price. So apart from securing your property and mortgage, you can also buy a slightly larger cover to protect the overall financial wellness of your loved ones. After your demise, they will have enough money to repay the loans and also to carry on with their existing lifestyle without any issues whatsoever.
- Digital Advantage -
You get a digital advantage when you buy term insurance. The plans are quite easily available online. You do not have to visit the office of the insurance company. You also need not to hire an insurance agent, as the plans are available online directly from the insurer. You get to make an unbiased choice, which allows you to get the most suitable term life insurance plan. So make use of this benefit and buy your plan online, where the quotes are cheaper as well.
The Final Word
Keeping all the points mentioned above, you can see very well that a term insurance plan serves a huge purpose and that is why every home buyer should get a term life insurance cover. You should look to get the most effective cover. Calculate the sum assured based on your loan amount and also select a suitable policy tenure. Unless you have the correct cover for the correct period of time, your term life insurance policy won't serve its purpose.