21 August 2011
Home Insurance is Mandatory for Home Loans
Many people are not aware that insurance cover has become mandatory for approval of home loans. Lenders do take care of their large sums of finance offered as loan by making it compulsory to insure the home that has been taken on a home loan. With so many options of lenders private as well as nationalised banks offering home loans many of these financial institutions have made tie-ups with certain insurance companies.
When the lenders get a customer who requires a home loan one of the documents to be processed is the insurance cover for the property or flat. Though the insurance companies offer an cover over natural or other hazards there is always a limitation on which hazards they cover. The borrower has to find out and read all the fine prints before selecting an insurance company for their home. Usually many lending institutions have an understanding with some insurance companies. Like the ICICI home finance have a tie up with ICICI Lombard. Also mentioning another finance company, HSBC has a tie up with TATA AIG for insurance cover policies regarding home loans.
The borrower can also opt for a policy of a larger amount that will cover all the other aspects of his life. Like sickness, accidents, unexpected losses as well as home accidents and burglary. Here also different insurance companies have different eligibility rules for covering calamities and thefts.
This amount of insurance is calculated according to the property cost and value of the house. The home insurance has the option to pay the insurance amount as a lump sum or in parts as the convenience of the borrower. Usually this amount as insurance premium is added along with EMI that the borrower has to pay every month according to the repayment schedule.