Choosing between LIC Term Insurance and Home Loan Insurance depends on your financial goals and protection needs. While LIC Term Insurance provides life coverage to secure your family’s future, Home Loan Insurance ensures your loan is repaid in case of unforeseen events. Understanding their differences helps in making an informed decision. Let’s explore which option suits you best.
LIC Term Insurance
LIC Term Insurance is a life insurance policy offered by the Life Insurance Corporation of India (LIC) that provides coverage for a specified term. In the unfortunate event of the policyholder’s demise during this term, the nominee receives the sum assured. It offers high coverage at an affordable cost, ensuring financial stability for your family.
Key Features:
- Pure life covers with no maturity benefits.
- Affordable premiums for substantial coverage.
- Lump-sum payout to beneficiaries in case of death.
- Flexible policy term options.
- Additional riders available for extra protection.
- Tax benefits under applicable laws.
Plans, Benefits and Eligibility
| Plan Name | Eligibility Criteria | Policy Term | Sum Assured (Min) | Key Benefits |
|---|---|---|---|---|
| LIC’s Digi Term | Entry Age: 18-65 years | 10 to 40 years | ₹50,00,000 | – Flexible premium options – Death benefit choices (Level & Increasing Sum Assured) – Lower premiums for non-smokers & females |
| LIC’s Digi Credit Life | Entry Age: 18-65 years | Equal to loan tenure | ₹50,00,000 | – Covers outstanding loans – Joint life cover option – One-time or limited premium payment |
| LIC’s Yuva Credit Life | Entry Age: 18-35 years | Up to 30 years | ₹50,00,000 | – Specially designed for young individuals taking loans – Affordable premiums – Minimal documentation required |
| LIC’s Yuva Term | Entry Age: 18-35 years | 10 to 40 years | ₹25,00,000 | – Protection plan for young policyholders – Option to increase coverage over time – Discounts for healthy lifestyle |
| LIC’s New Tech-Term | Entry Age: 18-65 years | 10 to 40 years | ₹50,00,000 | – Online purchase for convenience – High coverage at competitive rates – Choice of lump sum or staggered payouts |
| LIC’s New Jeevan Amar | Entry Age: 18-65 years | 10 to 40 years | ₹25,00,000 | – Customizable coverage (Level or Increasing Sum Assured) – Special premium rates for females & non-smokers |
| LIC’s Saral Jeevan Bima | Entry Age: 18-65 years | 5 to 40 years | ₹5,00,000 | – Standardized term plan per IRDAI guidelines – No restrictions on gender, location, or education – Cost-effective premiums |
Note: For the latest updates, visit LIC’s official website: licindia.in.
Also Read: Should You Choose a Term Insurance for Home Loan?
Home Loan Insurance
Home Loan Insurance, is designed to cover the outstanding home loan amount in case of the borrower’s untimely death. This ensures that the borrower’s family is not burdened with the repayment and can retain ownership of the home.
Key Features:
- Covers the outstanding home loan amount, reducing as the loan is repaid.
- Premiums are usually higher than term insurance and often included in EMIs.
- Payout is made directly to the lender to clear the loan.
- Helps the family retain the home without financial burden.
- Eligible for tax deductions under Section 80C of the Income Tax Act.
Plans, Benefits and Eligibility
| Plan Name | Eligibility Criteria | Policy Term | Sum Assured | Key Benefits |
|---|---|---|---|---|
| HDFC Home Loan Protection Plan | Entry Age: 18-65 years | Up to 30 years (loan tenure) | Equal to outstanding loan amount | Covers loan repayment in case of death, disability, or critical illness |
| SBI Rinn Raksha | Entry Age: 18-70 years | Up to 30 years (loan tenure) | Equal to outstanding loan amount | Flexible premium payment, option to cover co-borrowers |
| ICICI Prudential Home Assure | Entry Age: 18-65 years | Up to 30 years | Based on loan amount | Single premium plan, tax benefits under Section 80C |
| TATA AIA Home Loan Shield | Entry Age: 18-65 years | Up to 30 years | Equal to home loan amount | Covers death, disability, optional riders for critical illness |
| Bajaj Allianz Mortgage Guard | Entry Age: 18-65 years | Loan tenure or max 30 years | Based on loan amount | Covers outstanding loan, tax benefits, flexible coverage |
| Kotak Home Loan Protection Plan | Entry Age: 18-65 years | Up to 30 years | Equal to loan amount | Joint coverage option, single premium, flexible payouts |
| Max Life Home Loan Secure | Entry Age: 18-65 years | Up to 30 years | Equal to loan amount | Covers death, critical illness, additional riders available |
Note: For the latest details, visit the official websites of respective insurance providers.
Suggested Read: Should you get an insurance for your home loan?
Key Differences Between LIC Term Insurance and Home Loan Insurance
The key differences between LIC Term Insurance and Home Loan Insurance are given below in the table, helping you choose the right coverage for your needs.
| Feature | LIC Term Insurance | Home Loan Insurance |
|---|---|---|
| Purpose | Provides financial security to family | Covers outstanding home loan amount |
| Coverage | Fixed sum assured throughout the policy term | Decreases as the loan is repaid |
| Premiums | Lower and more affordable | Higher, often included in EMIs |
| Payout | Paid to the nominee for any purpose | Directly paid to the lender |
| Flexibility | Beneficiaries can use the payout freely | Payout can only be used for loan repayment |
| Tax Benefits | Eligible under Section 80C & 10(10D) | Eligible under Section 80C |
| Policy Term | 10 to 40 years | Equal to loan tenure (up to 30 years) |
Suggested Read: Section 80C: Tax Benefits for Home Buyers.
Pros and Cons of LIC Term Insurance
The pros and cons of LIC Term Insurance are given below in the table to help you understand its benefits and limitations.
| Aspect | Pros | Cons |
|---|---|---|
| Affordability | Lower premiums compared to other life insurance plans | No return on premiums if the policyholder survives |
| Coverage | High sum assured for financial security | No savings or investment component |
| Payout | Lump sum amount paid to the nominee | No benefit if policyholder outlives the term |
| Flexibility | Choice of policy term and sum assured | Premiums may increase with age |
| Extra Benefits | Additional benefits like critical illness, accidental death | Extra benefits come with higher costs |
| Tax Benefits | Deductions under Section 80C & 10(10D) | Tax benefits depend on prevailing tax laws |
Also Read: How to file fire insurance claims?
Pros and Cons of Home Loan Insurance
The pros and cons of Home Loan Insurance are given below in the table to help you evaluate its advantages and drawbacks.
| Feature | Pros | Cons |
|---|---|---|
| Loan Protection | Covers outstanding home loan in case of death | Coverage decreases as loan is repaid |
| Financial Security | Family is not burdened with loan repayment | Only pays the lender, not the family |
| Convenience | Often included in loan EMI payments | Premiums may be higher than term insurance |
| One-Time Premium | Some plans allow a single premium payment | Limited flexibility in policy usage |
| Tax Benefits | Premiums may be tax-deductible under Section 80C | Tax benefits depend on prevailing laws |
| Additional Coverage | Some policies cover disability or critical illness | Extra coverage increases costs |
Check Out: Home Loan Insurance Premium in India
Factors to Consider When Choosing Between LIC Term Insurance and Home Loan Insurance
Choosing between LIC Term Insurance and Home Loan Insurance depends on your financial goals and protection needs. Understanding their differences helps in making an informed decision.
| Factor | LIC Term Insurance | Home Loan Insurance |
|---|---|---|
| Purpose | Provides financial security to family | Covers outstanding home loan amount |
| Coverage | Fixed sum assured for the policy term | Decreases as the loan is repaid |
| Payout | Paid to the nominee for any purpose | Paid directly to the lender |
| Flexibility | Beneficiaries can use the payout freely | Can only be used to repay the loan |
| Premium Cost | Lower compared to home loan insurance | Higher, often included in EMIs |
| Policy Tenure | 10 to 40 years | Matches the home loan tenure |
| Tax Benefits | Eligible under Section 80C & 10(10D) | Eligible under Section 80C |
| Best For | Individuals looking for overall financial security | Borrowers wanting loan repayment protection |
Also Read: A Detailed Guide on Choosing Home Loan Insurance
Which Insurance is Better: Term Insurance or Loan Protection Plan?
The choice between Term Insurance and a Loan Protection Plan depends on your financial needs and priorities.
- Term Insurance provides a fixed sum assured to your family, which they can use for any purpose, including loan repayment, daily expenses, or future financial goals.
- Loan Protection Insurance specifically covers your home loan and ensures your family is not burdened with repayment if something happens to you. However, it only pays the outstanding loan amount, and coverage decreases over time.
Which One Should You Choose?
- Choose Term Insurance if you want comprehensive financial security for your family.
- Choose Home Loan Insurance if your main concern is paying off your home loan in case of an unfortunate event.
For maximum protection, you can combine both—get Term Insurance for broader coverage and Home Loan Insurance to secure your home loan.
Also Read: Home Loan Insurance for Green Homes
Conclusion
Both LIC Term Insurance and Home Loan Insurance serve different financial needs. Term Insurance provides broad financial protection to your family, while Home Loan Insurance ensures your loan is paid off in case of an unfortunate event. The choice depends on your needs, but term insurance offers more flexibility.
Frequently Asked Questions
Term insurance is better as it provides full financial protection, while home loan insurance only clears the loan.
Yes, you can take two term insurance policies from LIC based on your eligibility and financial needs.
Term life insurance gives full financial protection to your family, while home loan insurance only pays off the loan. Term insurance is usually a better choice.
No, term insurance is not mandatory for a home loan, but it is recommended for financial security.
The best term for insurance is until retirement or around 60-65 years, depending on your financial goals.
Term insurance has no maturity benefit, no cash value, and coverage ends if premiums are not paid.
Yes, home loan insurance premiums qualify for tax benefits under Section 80C of the Income Tax Act.
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