Buy individual term cover for greater flexibility and control

Lifetime costs for online home loan insurance can be up to 70 per cent cheaper than offline loan insurance, according to a recent note from Policybazaar.

- HIMALI PATEL

In addition to pricing, home loan borrowers must also scrutinise the policy features.Group vs individual term cover

Home loan insurance can come as a group cover linked directly to the loan, or borrowers can buy a separate individual term plan.

Group covers offer convenience. “Lenders issue them at the loan stage, often with limited medical checks, and structure them as reducing covers,” says Venkatesh Naidu, director, Insurance Brokers Association of India (IBAI). However, lenders often add the single premium to the loan amount. The borrower then pays interest on the insurance cost for years, which pushes the total outgo materially higher.

"Borrowers sometimes sign documents without fully understanding that the loan finances the premium,” says Shilpa Arora, co-founder and chief operating officer, Insurance Samadhan.

Group covers typically protect only the lender’s exposure, not the family’s broader protection needs. “They may also prove less efficient and portable if the borrower refinances or transfers the loan,” says Naidu.