Home Buying is often an interesting process. But at times, lack of finance create a hurdle in the homebuying process. But as we ponder we can see that, gone are those days. Now, with so many lending agents to lend you a handsome amount to own your dream home, homebuying is quite easier. But many times buyers get confused with the term Home Loan Protection Plan or HLPP. Is it complimentary with the loan or is it compulsory with the loan plan? What to choose between HLPP and Pure Term Insurance? This is often a question that keeps rising up. Let’s have a deep look into this.
What Exactly is HLPP?
Home Loan Protection Plan (HLPP) or Home Loan Insurance is just like any insurance plan. With this plan, even if the borrower is demised also, the insurance company will settle the amount with the lender. Thus it will support the family of the borrower in the course of the death of the borrower.
And Term Insurance?
Term Insurance is just as the name indicates, for a particular term or period during which the borrower dies, then the assured amount will be paid. This assured amount or premium is chosen at the time of buying the plan term. Pure Term insurance, when compared to HLPP, is a more economical way to cover the home loan and is indeed a more useful one.
Choose Between HLPP and Pure Term Insurance
Before buying a home, or even before taking a decision to buy a home, decide!
The decision is all about whether to go for an HLPP or a Pure Term Insurance. Let’s cross check a few features, few reasons that point us towards one among these two.
1. Costly HLPP and Economical Term Insurance
When we observe a few factors, we can see that the premium amount for the Home Loan Protection Plan is very high than Pure Term Insurance. Let’s say for example when we go for an HLPP, the premium amount will definitely be more than one lakh for almost 5 years. But at the same time, if we choose Pure Term Insurance, the amount will be less than 50 K. Look, what a big difference it creates.
- Pure Term Insurance is a more economical way as the premium amount is almost 2.7 times less than the premium amount of HLPP.
2. HLPP Validity is Only for 5 years, Not More than that
It is observed that HLPP is not available for the entire term of the home loan. Moreover, it has to be renewed after every 5 years, which is not economical. But the one advantage with Pure Term Insurance is that it is available throughout the entire lifetime of the borrower. Thus you don’t have to renew it timely but remains always as an asset.
- Pure Term Insurance you don’t have to renew after every 5 years, it is available for the insured person for the lifetime.
3. HLPP is a Single Premium Policy
It is often seen in HLPP that during the initial stage, there is no need to pay the premium amount as it will be added to the home loan amount. So, when you pay the interest (which is 11% for a home loan), the additional premium amount will also be added into this. Thus for HLPP, the interest rates will be little high compared to Home loan protection plan or Pure term insurance?
- Pure Term Insurance can be paid annually, so the interest rate won’t be that high.
4. Natural Death and HLPP give no Concern Over this!
If the borrower happens to die due to some disease, no chance he is going to get the cover. The reason is that HLPP doesn’t cover natural death, and all death caused by the illness of the body is considered as natural death too. It does not cover even suicide as well.
- Pure Term Insurance will cover both natural death and even suicide if it happens after 1 year from the taking of policy.
5. Depleting Nature of HLPP
Let’s look at an example this time. If two people took a loan worth 60L and after few years if both of them pass away. Person A has taken A HLPP and Person B, a Pure Term Insurance. At the time of death what they have to pay back is 46 L. So now person A will get 46L, which will directly be given to the lender. But person B, he will get the entire 60 L of which 46 he can payback and rest use it for other purposes.
- Pure Term Insurance is not depleting in nature. It is constant throughout the entire plan period.
6. HLPP is No More if in case of Foreclosure or When the Home Loan is Shifted
Consider the condition where you have taken a home loan and HLPP for 5 years. But if you pay the amount and close the home loan within 3 years, then you won’t get the refund of premium. Moreover, HLPP will by default become void. Similarly, if you shift the home loan to a new lender, the HLPP with the existing lender will become void.
- Pure Term Insurance does not have any of these problems.
Now, before you take a decision, take some time, ponder over the good and the bad. Choose, after all, you are free to choose your own home, in your own comfort.