State Bank Of India Home Loan Insurance
State bank of India is one of the largest financiers and home loan providers in India. They offer customized loan products with flexible repayment plans to suit every individual need. They enjoyed the trust of millions of Indians being the largest public sector bank in India.
The Concept of Home Loan Insurance
In India at present, most of the houses and flats are purchased financed by a home loan. Buying the dream home is a cherished moment and probably the single largest investment in one’s lifetime. And the same time buying a property offering creates a huge financial liability on the family.
This situation can lead to very precarious circumstances in case of untimely death of the main borrower. If the family is not in a position to pay the EMI, then this may lead to the forfeiture of the property and lots of trouble to the surviving members.
To avoid this situation, it is often advocated to take a home loan insurance protection policy, in which the insurance company commits to pay the remainder of the EMI in the case of untimely death or permanent disability of the principal borrower. The amount of payment made under home loan insurance policy is famed as the balance outstanding on the home loan and the time of claim.
Do You Really Need Home Loan Insurance – Are There Any Alternatives
There is no doubt that protection against the risk towards home loan liability is a must for every home loan borrower. But it does not mean that home loan insurance policy is the only option.
We have earlier carried a blog post on this website, where we have detailed how a pure vanilla Term Plan life insurance policy can safeguard against the risk of home loan liability. Please read our post Is Home Loan Insurance a Wise Decision – Cost, Benefits, Alternatives. There we have given arguments and reasons, why you should avoid taking a home loan insurance risk cover and go for Term Plan life insurance policy. The main reasons were as follows.
- Life insurance policy premium is often much higher than simple Term Plan life insurance.
- The risk coverage in a home loan insurance plan is limited only to the principal outstanding loan balance. This means that it reduces over the loan tenure with each successive EMI payment. On the other hand the risk coverage in case of Term Plan remains constant and is much higher than home loan insurance.
- Home loan insurance may not be transferred to the third party in case you decide to transfer your home loan balance to another lender.
- The home loan insurance may not adequately cover the risk in case of a rising interest rate scenario resulting in longer loan tenure.
RINN Raksha Home Loan Insurance Scheme From SBI Life
SBI life, a subsidiary of State bank of India, offers a group credit life insurance plan which commits to pay the remaining EMI in case the principal borrower is not in a position to pay them due to untimely death or permanent disability.
The following is quoted from the product brochure of SBI life rinn Raksha home loan insurance scheme.
SBI Life Insurance Company Limited (SBI Life) offers SBI Life – rinn Raksha*, a feature-rich Group Credit Life Insurance product to pay off the outstanding loan offered by financial institutions or other groups or associations in the event of death or disability of the insured member(s) of the group. In the event of critical illness, it lightens the burden of loan repayment.
We offer an excellent package to lighten the burden of debt in case of an unfortunate event of death, disability, critical illness or hospitalization due to accident.
Key Features of RiNn Raksha – Home Loan Insurance Policy from SBI Life
The key features of SBI home loan insurance scheme RINN Raksha are as follows.
- Wide variety of loans covered – it not only covers the housing loans, but also gives loan protection in case of car loans, agricultural loans, educational loans and personal loans.
- Multiple premium paying options – you can choose the premium paying options anything from one year, three years, four years, five years or 10 years.
- Up to 3 joint borrowers are allowed
- Tax benefits as per prevailing tax laws under section 80 C and section 10 (10D)
The other features are as follows.
- A comprehensive benefit package that can be customized to cover your debts in case of death, disability or diseases.
- The death cover would be the outstanding loan balance at the time of death as per the amortization schedule at a rate of interest fixed at the time of inception of cover.
- The outstanding loan balance at the beginning of the month would be the benefit payable for deaths during the month.
- Members would have an option to increase the cover up to a level of 120% of the loan at the inception of the cover.
- The financial institution may fund the premium by including the premium in the loan amount.
- A moratorium of 3 months to 6 years would be allowed during which period, the disbursements could be staggered. Additionally, the amount of cover can remain static or increase according to the interest applicable.
- In case of moratorium, the loan outstanding and hence the sum assured would increase due to the disbursals and / or interest amounts due and would start decreasing from that level from the end of the moratorium period when emis would commence. If the accrued interest is paid separately by the member to the financial institution, then the loan outstanding and hence the sum assured would remain the same during the moratorium period and would start decreasing from the end of the moratorium period when emis would commence. If the accrued interest is to be added to the initial loan, then the loan outstanding and hence the sum assured would increase during the moratorium period and would start decreasing from that level from the end of the moratorium period when emis would commence.
- Flexibility to choose loan cover term as per need, subject to minimum of 2/3rd of the loan term, if the loan term is 15 years or more.
- Existing borrowers of the financial institution can also be covered for the outstanding period of the loan.
- Lives of upto 3 co-borrowers can also be covered. Co-borrower cover can take one of the following forms:
- Each of the borrowers is insured for the entire outstanding loan amount. In case of death of any one of the borrowers, the outstanding loan amount is paid and the surviving borrower(s) would be eligible for the applicable surrender value.
- Each of the borrowers is insured for their respective share of the loan. In case of death of any one of the borrowers, the cover would continue for the remaining members.
- There are flexible premium paying terms (PPT) available. Premiums can be paid as a single premium (SP) or as level premiums (LP) payable for 3, 4, 5 or 10 years not exceeding 2/3rd of the loan term.
- Lps can be paid in Yearly, Half-yearly, Quarterly or Monthly modes.
- Options (Gold or Platinum) are available to cover loan outstanding at floating rate of interest at a nominal additional cost.
- Riders are available at a nominal additional cost.
- The product would also be customized in other circumstances, wherever it may be appropriate.
- There is no maturity benefit payable.