LIC Home Loan InsuranceOwning a home can bring with it a lot of anxiety about the future and being able to repay the home loan. I think this is particularly true in single-income households. Worries about what will happen if the wage earner loses his or her job, dies, or is unable to work for any reason, are very real and valid concerns. A husband worries, will his wife and children be able manage if something happens to him and he’s unable to work? Would they lose the home that is their security? These are very scare thoughts, and no one wants to think about these dismal outcomes. But the truth is, that they do happen. Fortunately, there is home loan insurance to relieve your worries. It’s not an insurance that you legally have to buy, it’s one that you choose to buy, or not. And, it will cost you.

Home Loan Insurance - What Is It?
The important thing to know about this insurance is that it is insurance on your bank loan and not on your home. That’s why it’s called home loan insurance and not homeowners insurance. Homeowners insurance would be insurance for your house and not your loan.

Homeowners buy home loan insurance so that in the event of an inability to repay the amount owed to the lending company, the balance of the mortgage will be paid off. For example, if your mortgage is for $250,000 (loan principle without interest). Let’s say that your family’s sole income provider is killed in an accident and you are unable to repay your mortgage. However, before this happened, the provider had made monthly payments and reduced the principle by $50,000. The principle balance is now $200,000.

If you have home loan insurance, the insurance company will pay off the $200,000. If you don’t have insurance, you are still responsible for paying it. There are different type of this kind of insurance and some cover long-term disability and other reasons for loss of income. If you purchase the security this insurance brings you, be very sure you know exactly what is covered. You don’t want any surprises.

How Much Does Home Loan Insurance Cost?

Home loan insurance varies by individual, so there is not one cost of premium to quote. Generally, it will depend on a few basic conditions regarding the loan holder(s).

• Age – the older you are, the higher the premium.
• Loan amount – the larger the loan, the higher the premium.
• Length (tenure) of the loan – the longer the repayment period, the higher the premium.
• Medical records – the higher the medical risk, the higher the premium.

Where Can I Purchase Home Loan Insurance?

Many banks and lending companies sell home loan insurance and will most likely offer it to you at the time of the closing on your house. If the institution that holds your mortgage doesn’t sell the insurance, call the insurance agency that you have homeowners insurance with. Also, shop around and compare premiums to get the best insurance policy for your situation.