This will be an extremely catastrophic situation. Think about it. Suppose you purchase a house on loan of Rs 50 lac and have moved in the house with your family. Now unfortunately after just few years of you having purchased the house, you die in a road accident.
The family is shattered at your loss. But that is just one aspect of the problem. They are now also to deal with the burden of repaying the home loan. If you had a large enough life insurance, atleast this worry would have been taken care off. But if not, then your family will be forced to service the EMIs and if they are unable to do it, the lender will have no option but to auction the house to recover your dues.
That is a scary situation indeed. And you don’t want your family to be in such a situation. Isn’t it?
This is the reason why it is always advised to be adequately insured. And more so if you have a hug eligibility on your head. One can even take loan insurance. This will protect your family from any unpaid loan obligations. So if the borrower dies during the loan repayment period, the insurer would repay the outstanding loan amount to the lender and most importantly, relieve the family from the burden of future loan repayment.
If you agree with this, your next question will be as to how much insurance cover you should have? The answer is that it should be atleast be equal to the outstanding loan amount. But having a higher cover is much better as it can be used to help family in other ways as well.
If you have read through the above, you are sure to understand the importance of having the right insurance cover, atleast for home loan borrowers. This insurance is a very small price that one pays for eliminating the risk of burdening one’s family unnecessarily.