Loan Safety: How to Protect Your Family from Outstanding Loan Liability
Taking a loan, especially a home loan, is a common way to achieve big financial goals, like buying a house. However, many borrowers overlook what happens if the borrower passes away during the loan tenure. Without proper precautions, the bank can demand repayment from the borrower’s family, creating financial stress for loved ones.The Important Step to Protect Your FamilyThe solution is simple: opt for a loan protection insurance or term life insurance linked to the loan.1. Loan Protection Insuranceo Many banks offer loan protection insurance when you take a loan.o In the event of the borrower’s death, the insurance pays off the outstanding loan, relieving the family of liability.2. Term Life Insuranceo Alternatively, you can take a term life insurance policy that covers at least the loan amount.o This ensures that your family can repay the loan without financial hardship.Key Points to Consider· Check Loan Documents: Ensure the loan agreement mentions insurance or protection options.· Coverage Amount: The insurance should cover the entire outstanding loan, not just a part of it.· Premium Payment: Some banks include the insurance premium in the EMIs, while others require separate payment.· Policy Type: Opt for term or loan-linked insurance, not general life insurance, for complete protection.Benefits of Loan Protection· Protects your family from sudden financial burden.· Provides peace of mind for the borrower during the loan tenure.· Avoids complications or stress for heirs in settling the bank dues.Bottom LineIf you have an ongoing loan, especially a home loan, do not leave your family exposed to financial risk. Ensure that you either opt for loan protection insurance or a sufficient term life insurance policy. With this simple step, in case of an unfortunate event, the bank cannot demand repayment from your family, and your loved ones are financially secure. Disclaimer:The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.