SBI Home Loan Insurance

Estimated reading time: 5 minutes

When considering a home loan, it’s important to think about more than just interest rates and repayment terms. Protecting your investment against unforeseen circumstances is equally crucial.

If you have a home loan with SBI, the bank offers a robust insurance solution tailored to the needs of homeowners. By aligning the coverage with the loan amount and duration, SBI Home Loan Insurance provides peace of mind, securing both your property investment and your family’s financial well-being.

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What is Home Loan Insurance?

Taking out a home loan is a major, long-term financial decision, often stretching over 25 to 30 years. Life doesn’t come with any guarantee cards, and unforeseen events like the death of the primary breadwinner, who is responsible for the EMI payments, can place immense financial stress on the family.

In such situations, the burden of the remaining loan payments falls on the dependents, and failing to meet these obligations could result in the loss of the home or other collateral. To safeguard against these harsh realities, securing home loan insurance is essential—it acts as a protective barrier, ensuring your family’s financial stability and keeping your home secure, no matter what life throws your way.

Eligibility Criteria for SBI Home Loan Insurance

To avail of SBI home loan insurance, you must meet certain eligibility criteria:

Criteria	Details
Age	Applicants must be within 18 to 65 years.
Loan Amount	The insurance cover is up to the loan amount sanctioned by SBI.
Health Conditions	A health check-up may be required.
Income Proof	Proof of steady income to pay premiums.
Loan Tenure	The insurance cover aligns with the loan tenure.

Is Home Loan Insurance Necessary?

Home loan insurance is usually availed while procuring the home loan from the financial institution offering the loan. It is often bundled with the home loan.

However, it should not be sold as a mandatory part of the home loan. There are no insurance regulations mandating loans along with insurance.

How Does Home Loan Insurance Work?

Home loan insurance functions much like term insurance, providing coverage for the duration of your loan repayment period. Once you’ve fully repaid your loan, the insurance coverage ends.

If the individual responsible for repaying a home loan passes away during the loan term:

• Inform the bank and get the insurance claim activated.
• Initiate the claim process. The family or legal heir must submit the death certificate and proof of the outstanding loan amount to the insurance company.
• After reviewing the documentation, the insurance company approves the claim.
• The insurer pays off the remaining loan balance directly to the lender.
• This payment clears the debt, preventing seizure of the home or other collateral by the bank.

How to Pay Home Loan Insurance Premium?

Many home loan protection plans offer the convenience of a one-time premium payment. Additionally, borrowers have the flexibility to incorporate this premium into their total loan amount.

For instance, if the lender approves a borrower for a ₹30 lakh loan and the insurance premium is ₹1 lakh, the borrower can choose to increase their loan amount to ₹31 lakhs.

Benefits of Home Loan Insurance: Lender’s Point of View

Banks/ NBFCs aim to protect their loans from turning into bad debts. Therefore, they encourage borrowers to take home loan insurance protection.

Here’s why a home loan insurance is beneficial for SBI:

• Ensures loan repayment even in case of borrower’s death or disability.
• Maintains cash flow consistency and loan portfolio health.
• Lowers the risk of loan defaults and related financial losses.
• Helps meet regulatory requirements for loan security.

Riders and Additional Coverage Benefits

Many home loan insurance providers feature a range of optional riders to augment the core benefits of their plans. These additional options can include coverage for:

• Critical or terminal illnesses
• Accidental death
• Loss of Employment
• Total and Permanent Disability

Home Loan Insurance vs Term Insurance

Features	Home Loan Insurance	Term Insurance
Cost of Premium	Lump sum Added to loan amount Higher rates	Paid annually, half yearly, or quarterly Low rates
Coverage	Decreases with loan repayment Expires when loan is paid	Fixed period Pays death benefit in lump sum
Tax Benefits	Deduction under Section 80C, up to Rs. 1.5 lakh	Deduction under Section 80C, up to Rs. 1.5 lakh
Flexibility	Limited flexibility Mainly serves to protect against loan default.	High flexibility in terms of coverage amount, term, and beneficiaries.

Secure Your Home Loan

Home loan insurance is optional when securing a home loan, but it plays a crucial role in protecting your finances and assets. Before choosing this insurance, conduct thorough research.

Financial institutions may promote their insurance products for profit; ensure the policy you select meets your specific needs. You have the option to purchase insurance later from different financial institutions or through insurance portals.

For tailored advice on SBI home loan insurance contact Credit Dharma.

Frequently Asked Questions