By Gargi Banerjee | May 21, 2015, 11.14 AM IST | Economic Times
Want to get over with buying an insurance policy at one go because you have some money lying idle? A single premium insurance policy is just the thing for you then. As compared to a traditional or a regular premium insurance policy where you pay insurance premiums at periodic intervals, this is a onetime payment solution for those who do not want to get into the hassle of periodic payments.
Once the premium payment has been made, you become the owner of a policy with a specific death benefit. It is literally a “fill it, shut it and forget it” kind of a policy, as you do not have to worry about paying any further payments or the lapse of your policy in case in forget to make any payments. All major insurers provide single premium life insurance policies for the benefit of their customers and you can use the help of a policy aggregator website to find out which one works best for you.
When should you buy a single premium policy?
Most people prefer to buy a single premium life insurance policy when they have a lump sum available with themselves. It may be a hefty tax fund, a cash gift from a relative an inheritance or some windfall gains in case of business owners. If you do not wish to spend this money right away and are wary of investing it in the markets, or you think there is some more insurance cover you could do with, you can certainly opt for a single premium life insurance policy.
Protect your wealth against taxation
A single premium life insurance policy provides you protection against the axe of taxes. You are given exemption of upto R 1.5 lakhs when you invest in a single premium life insurance policy. Further the sum assured is also tax free in the hands of the receiver. God forbid if something were to happen to you, your beneficiary would receive the money completely tax free. However do bear in mind, that on a single premium life insrance policy you will get the benfit of tax exemption only once, as you are investing in it for a single time only.
Forget about lapses
Since the policy is paid up in full upfront you never have to worry again about the policy getting lapsed in case you forget to pay the premium. It is valid till the entire term of the policy and renders the sum assured after the policy term comes to an end. Creates cash value.
When you make the payment of single premium on a policy you are creating an asset for yourself. In case you need to avail of a loan facility, this can come in handy and can be used as a collateral against your loan. Besides, the cash value of the investment you have made accumulates every year, without you having to invest year after year.
Thus as you can see, single premium life insurance policies, though usually not the preffered vehicle for securing one’s life, can certainly offer some benefits. But the largest factor you should keep in mind is the affordability part of it. So if you can think of sparing the lump sum and locking it away to take care of your insurance needs, go ahead and get yourself that single premium insurance policy.
India Infoline News Service | Mumbai | December 26, 2014 19:16 IST | IndiaInfoline.com
The financial planners suggest the individuals to pick a term plan so as to cover the loan.
If you are finding the best way to save your home loan, then this article is for you. Here, we will discuss two options, term insurance policy, and home loan insurance.
One of the most important dreams in a person’s life is to buy his or her home. To fulfill a dream, an individual takes a home loan which puts the house on mortgage. The home remains with the lender till the time buyer doesn’t pay the complete loan amount. However, it is important to safeguard the property so that in the event of any accident the home remains with the family. The motive is achieved by a term insurance policy or home loan insurance.
The financial planners suggest the individuals to pick a term plan so as to cover the loan. However, there are other loan protection plans designed and offered by the insurance companies to take care of the outstanding home loans in the event of unforeseeable circumstances.
A loan insurance protection plan covers the balance amount to be paid in case of death of the borrower. The plan is specifically made for high-value mortgages. The premium rates are higher and depend on several factors including the loan amount, age of the borrower, the medical history of the borrower and the loan tenure.
The loan insurance cover acts as a surety to the lenders. The loan cover is bundled with the loan amount. The borrower can either pay the initial premium himself or he can get it funded from the lender. The options come with different tax implications. If the borrower pays the premium, he will be eligible for tax deduction under Section 10(10D) and Section 80C. However, if it is paid by the lender and is included in the loan amount, the borrower will not get any claim deduction.
A vanilla term insurance is a better alternative than a mortgage insurance policy. The term plans are cheaper and also provide high cover to the borrower.
The insurance provided by the loan cover will gradually reduce as the loan gets repaid. However, the insurance cover stays constant in a term plan. It will cover the outstanding home loan and will also meet the other financial requirements of the borrower’s family in case of unfortunate death.
The loan insurance is of little significance once borrower has prepaid loan. It is the same case when the sum assured declines with the time. It is the reason term plan should be considered over loan insurance.
Also, loan cover insurance is associated with a single premium option which implies that if the borrower prepays the loan amount, there will be no impact on insurance cover or premium. There will be other portability issues if borrowers want the loan to be refinanced by another lender.
In case borrower wants to increase the loan tenure due to hike in interest rates, the cover may not be sufficient to fully cover his home loan. Considering all the factors, it is clear that a term loan is better than home loan insurance.
By: CreditVidya | December 26, 2014 9:24 pm | Financial Express
It is one thing to get a home loan and a different ball game to repay the loan, the tenure of which may run over a decade. With such long period of commitments, it is bound to put a person in an insecure mode as anything can happen to the loan holder. To ease yourself of the worries, it is important to take an insurance to protect your life to cover this loan burden in case of any casualty. That way your family inherits your home and not your loan burden.
Buying a house is a big deal today simply because of the high expenses one has to incur while buying. It can be overwhelming in many cases, because you will have to literally pull out all your savings to get it. These days a lot of funding burden has been reduced thanks to the home loans. The lenders also offer you an insurance policy to cover your home loan in case something happens to your life. You have the choice to choose any insurance policy from any company and can say no the bundled offer which in most cases will be from a group company and might come to you at a higher premium.
When UR Simha, a Pune-based techie bought his house, he took a loan from HDFC. He also bought an insurance policy that was offered at the time of signing the loan documents. What he did not realize was that the insurance tenure was for five years and where as his loan was for 20 years.
“I did not even think of securing my life until they offered this insurance. It came at the last minute, so I did not think twice. I bought it anyways. Later, I got to know the details and features of competing insurance products were much better. I wish I had done some study before I paid the premium,” he said.
So what are the terms and conditions you should look for in such policies? Following are a list of features available:
Cover: Ensure that the term covers the entire loan value. Some of them cover applicant and the co-applicant. Choose what suits you the best.
Tenure: It always makes sense to buy a term insurance that covers entire life span of the loan
Premium: Enquire with all the insurance providers. Do not fall for the marketing gimmick of your lender who is trying to cross-sell a product.
You might find a competitor offering you similar terms for lesser amount.
Unemployment benefits: Some of these insurance policies also offer certain benefits in case of a job loss. They pay your EMI if you have been retrenched in your company. But please note that this is for a few months only and you have to provide a proof of being asked to leave along with the reason. So, if you have a job, which is prone to downsizing, it is a good idea to consider this kind of a policy.
Critical care benefits: Some policies also cover your home loan if you end up being in an accident and are bed ridden for life. In such cases the loan outstanding will be waived off. The premium might be a little higher but the benefits are proportional.
Covering the house: Most policies also cover your house and some of them give you additional benefit of covering the contents in your house. But the cover is subject to certain terms and conditions. So make sure you know what you are paying for.
Source : http://goo.gl/OKzYch
Priya Nair | Mumbai June 11, 2014 Last Updated at 15:04 IST | Business Standard
This will ensure that even if you take top-up loan you don’t need to take additional insurance
If you have an existing home loan and are in need for funds, an easy way to raise money is to opt for a top-up loan. Since it is a secured loan and you are already servicing it, your bank or housing finance company will not refuse you a top-up loan. But what if the lender insists that you take a loan protection insurance? Should you take it for the entire outstanding amount? Or only for the additional loan amount? Or should you take one at all?
V N Kulkarni, counsellor with debt counselling centre Abhay, says that taking a loan protection insurance is voluntary and nobody can force the borrower to take insurance. However, it is in the interest of the borrower to take insurance. “If, for instance, the borrower meets with an accident and dies then the family could be saddled with a huge liability. So, an insurance to cover the loan is useful,” he says.
Gaurav Gupta, CEO of My Loan Care, an online loan advisory platform, also says that there is no such requirement that loan has to be taken with insurance. While the big banks or housing finance companies may not insist on such insurance, the smaller ones may do in order to protect their margins.
“Small banks and NBFCs may offer rates similar to the big players, but they may bundle additional products like insurance along with the loan to cover their higher cost of funds,” he says.
Many lenders may insist that you take a credit protection plan. Some companies offer an option of a decreasing term cover over the tenure of the policy. This is because the sum assured is linked to the loan outstanding and as the loan gets repaid the sum assured also decreases. But in this case if you take a top-up loan the lender may insist that you take another insurance policy to make up for the gap. To avoid this it is advisable to take a pure term plan, where the sum assured remains the same.
In fact, if you have an existing term insurance policy, then there is no need to take additional insurance, points out Kulkarni.
“You have to ensure that the insurance covers the entire liability. Banks put in insurance as a condition to sanction loans because they want recovery to be smooth. They want to avoid getting into Sarfaesi and selling the property. It is easier to recover the dues if there is insurance,” he says.
Lenders usually insist on a loan protection insurance for home loan since they are long-term and big ticket size loans. In case of personal loans, usually banks don’t insist on insurance since the amounts are smaller, typically Rs 50,000-3 lakh.
But if you take a second personal loan (which is more common than a top-up), then the lender may insist on increasing the insurance cover, says Gupta.
Source : http://goo.gl/SgKpQL