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Nath Balakrishnan

WITH interest rates on housing loans quoting at competitive levels, buying a house has become all the more affordable in recent times.

While this may ensure that most people realise their long-cherished ambition of owing a home, it is equally important that should the person who bought the property die, the dependants do not face any hassles vis-à-vis the house loan.

This is where a housing cover loan comes into play. We will examine the features of SBI Life's loan cover plan.

How the plan works

SBI Life administers the policy as a group insurance plan which ensures that premiums are lower.

The premium is a function of three elements: Customer's age, loan amount and tenure of repayment.

If the insuree dies during the loan repayment period, the loan amount outstanding will be paid out by SBI Life.

This ensures that the policyholder's dependents continue to have possession of the house.

For banks too, such a plan is beneficial, as it prevents loans from turning out into non-performing assets.

The entire premium has to be paid at the policy term's beginning. But if one takes a loan from the lending institution for making the premium payment, the same can be repaid in instalments.

This plan is available for both new and existing loans; in the case of the latter, the loan would be to the extent of the amount outstanding under the loan.

Other features

In case the housing loan is taken jointly, both borrowers can be covered with life insurance. The minimum and maximum sum assured under the plan is Rs 25,000 and Rs 50 lakh respectively.

The minimum and maximum age at entry for the plan is 20 and 60 respectively. For a cover of up to Rs 5 lakh, the borrower needs to only sign a declaration of good health. Cover is available till the borrower reaches 70 or till the loan is repaid, whichever is earlier.

If the borrower decides to foreclose his loan, the excess component of the premium will be refunded to the borrower after accounting for certain administrative charges.

Readers are requested to compare products featured under this column with similar ones offered by other players.

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