Planning to buy your dream house with the help of a home loan, but have a fear that if something unexpected happens, who will bear the burden of EMI? Well, don’t panic because today all the financial institutions including banks have solution for everything. And in such cases, a Home loan protection plan (HLPP) offers the best solution to all your problems.
So let’s understand the importance of this plan in detail:
What is HLPP?
A home loan protection plan (HLPP) is a plan which saves loan borrowers from the risk of becoming a defaulter. It covers the outstanding home loan amount with the bank/lender if the borrower faces any critical illness or something unexpected happens to him/her.
For example: If a loan borrower has taken an HLPP and the person is later diagnosed with a critical illness, then in such cases, the bank recovers the remaining outstanding loan amount from the insurance company and do not trouble the borrower’s family members.
However it is not mandatory to buy an HLPP while availing a home loan, the borrower has the power for its acceptance or rejection.
On the other hand, if a person takes protection plan on a home loan, there are two options available. The first option is to pay the premium as a lump-sum amount in one single payment while the second is to pay an HLPP Equated Monthly Installment (EMI) clubbed with the home loan installment.
Types of HLPP
Depending on the type of cover, three types of HLP plan are available. This includes:
- Reducing cover plans:
Under this plan, the cover reduces along as your liability falls i.e. the life cover goes down just like loan’s outstanding principal amount.
- Hybrid Plans:
The cover remains fixed for a certain period and then start falling for the remaining period.
- Fixed cover plans:
In this, the cover remains fixed for the entire period.
Most of the experts say that the reducing cover plan offers best solutioons among all three.
Benefits of HLPP
The borrower gets tax benefits under section 80 C of the income tax act.
A single life cover includes all the borrowers in a joint loan. No need to purchase separate HLPP for the specific borrower.
In case of unfortunate death, the family members don’t have to bear the payment of EMIs. The entire amount due is taken care by the insurance companies who pay it to banks.
Apart from sudden death, critical illness and other disability are also covered under this plan. Diseases covered under HLPP include Cancer, Kidney failure (end-stage renal failure), Primary pulmonary arterial hypertension, Multiple sclerosis, Major organ transplant, Coronary artery bypass graft, Heart valve surgery, Stroke, Myocardial infarction (first heart attack), Coma, Total blindness, and Paralysis. However, this coverage may differ from banks to banks.
Things to remember before applying for HLPP
If a person is already suffering from an illness and hide it with the bank at the time of applying for the policy, then claim for protection will be rejected.
In case a person is diagnosed with a critical illness, they have to immediately inform the bank about it. Any failure to do so may result in the bank refusing to accept your request.
- In case the details provided in the papers are found to be wrong at the time of the claim, the request for cover will be rejected. Check all the details twice because, even if the mistake is made on the part of the bank, the borrower has to bear all the cost.