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L.N. Revathy

Coimbatore, June 28 Have you availed yourself of a home loan and has the bank insisted that you take an insurance cover for the outstanding amount of the loan? If yes, have you got the policy documents from the bank subsequently?

Most home loan borrowers are either not in the know of it or presume that the lending institution that had insisted on the cover has done it and they would not have to worry.

While it is the duty of the bank to submit the proposal immediately to the insurance company and arrange to get the policy documents and hand over the same to the borrowers, it is learnt that some banks fail to submit the application and the policies are never taken.

Mr M. Govinda Rao, a retired bank official, cited some instances of lapse on the part of some banks in submitting the proposal. “While an additional amount is added to the home loan sanctioned amount, presumably towards insurance premium, the same is either not sent with the proposal form to the insurance company or sent very late.”

When contacted, the District Consumer Redressal Forum President, Mr S.A. Sreeramulu, said about 6-7 cases regarding deficiency in service by banks and insurance companies (with respect to housing loans) have been filed of which he had passed orders in respect of three cases in favour of the borrowers. The remaining three are pending before the court, he said.

“In one reference, the borrower had died before the bank submitted the policy proposal, almost a year after the date of sanction of the loan. The claim could not therefore be made because the policy had not materialised at the particular time. There have also been instances of banks failing to handover the policy to the borrower after receiving it from the insurance company, leaving the legal heirs in the dark about any such policy,” he said.

“Borrowers should ensure submission of the proposal form to the insurance company without delay and should demand the policy from the bank / insurance company and keep the papers along with their bank loan documents,” said Coimbatore Consumer Cause Secretary, Mr K. Kathirmathiyon.

“The borrower should inform his family members about the insurance policy and banks should take proactive steps in submitting the claim proposal to the insurance company in the event of the death of the borrower for liquidation of the loan,” he added.

“Some banks offer ‘Free Accident Insurance’ cover on housing loan. Unfortunately, most borrowers are not even aware of such a policy. And, in banks, except for the operating officials, many are not aware of it,” Mr Govinda Rao said.

“Borrowers should enquire about such freebies at the time of sanction of the loan and demand that it be made available to them. Further, the bank should ensure that the policy paper regarding the free accident cover is handed over to the borrower immediately on sanction of the loan and make a note of it in the sanction letter,” he suggested.

“Insurance polices are normally issued against a particular loan account. In the event of a change in the account number, for whatever reason, the borrower should ensure that the cover is available to the new account also.

He should not presume the extension of the cover to the new account as automatic. Else, in the event of a claim, the insurance company might refuse to settle the claim contesting that the two accounts are different.”

More Stories on : General Insurance | Real Estate & Construction

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