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Importance of insurance for your home

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Owning a home is a lifelong dream for most of the people. After making substantial investments in that dream abode, one needs to be insured against future risks and perils. There are two kinds of policies that a borrower must consider; one is for the life of the borrower and another one for the property. People many a times perceive insurance, while buying a home, as an unnecessary expense. In reality, it is important that a borrower must opt for an additional cover as per the loan amount even if already there exists as insurance policy in the borrower’s name. This is because the loan is an addition to the borrower’s liabilities and that in case of the unfortunate demise of the borrower the family should be able to continue the existing lifestyle without having to provide for the loan from the receivables of the existing insurance policy. If the borrower goes for an added cover, this cover would take care of the home loan and leave the existing policies to take care of other regular obligations for which the borrower would have taken them in the first place. There are two main options while taking a cover for the home loan.
The borrower may opt for a policy where the cover keeps reducing with the loan amount as it is repaid. The cover is restricted to the amount of loan outstanding and thus is adjusted directly with bank in the event of the unfortunate demise of the borrower. Due to this the cost for this option is lower than the normal term insurance and the customer ends up getting maximum benefits at the minimum cost.
The customer may opt for the basic life cover/term insurance plan for a minimum period equal to the tenure of the loan and amount minimum equal to the loan amount. In this case the borrower is insured for an amount equal to the loan amount at the start and remains insured for the same till the end of the loan tenure. In the event of the unfortunate demise of the borrower, the nominee gets an amount equal to the loan amount. Part of this can then be used to settle the loan and the remaining can be used for other requirement as the case may be.
Similarly the property insurance also plays an important role in case of hazards like fire, earthquake etc. and protects the borrower from loss incurred therein.
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Article Source: Messaggiamo.Com





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