You can claim tax benefits under Section 80C and Section 24 of the Income Tax Act for paying your home loan insurance premium.
Insurance is a measure that assures you of safety at the time of any unfortunate event. This is why insuring your home, as well as your home loan and other valuables, is important. Do remember that home insurance and home loan insurance are two different covers and cater to different insurance needs.
This is the insurance that you buy to cover the replacement cost of your home in case of a damage by fire or other such accidents. A home insurance policy protects home owners against the loss of home or personal belongings. Compared with home loan insurance, home insurance policy rates are lower.
Under a home loan insurance policy, the loan you take for buying the property is insured. This plan covers only the outstanding loan liability from the time it is brought. In case of an event where the applicant is unable to repay the loan, the proceeds of the home loan insurance cover help the family repay the outstanding amount.
Also, home loan insurance allows people with limited savings to buy homes earlier by guaranteeing the full amount of the mortgage. If your home loan is covered, your lender will not be burdened with the additional risk that you may default in case of any mishap. Apart from that, buying a home without any loan insurance requires larger down payment. So, it is always advisable to go for a home loan insurance policy.
Like any insurance policy, a premium has to be paid for a home loan insurance policy, too. This premium broadly depends on four factors:
The applicant's age: The older you are, the higher is the premium you pay.
Your loan amount: The larger the outstanding loan amount, the more the premium.
The tenure: The longer the repayment period, the higher the premium.
The medical report: The better the health, the lower the premium.
In a home loan insurance, the premium payment could be made in one go or in instalments, along with home loan EMIs. Suppose you took a home loan and got it insured. You could pay the insurance company upfront if you have enough funds. Otherwise, your lender will pay the amount on your behalf, and you become liable to the lender for this amount, along with your home loan EMIs. So, the total loan insurance premium becomes a part of your total loan liability and gets added to your EMI. Also, check with your lender its norms for pre-payment of such loans. The other benefit of buying a home loan insurance policy is that you can claim tax benefits under Section 80C and Section 24 of the Income-Tax Act for paying the premium.