Is it Compulsory to Take an HDFC Life Insurance Policy for a Home Loan from HDFC?
Many individuals are under the impression that taking out an HDFC Life Insurance policy is mandatory when applying for a home loan from HDFC. However, this is not the case. Understanding the requirements and benefits of the life insurance policy can help borrowers make an informed decision.
Do You Need to Purchase an HDFC Life Insurance Policy?
No, it is not compulsory to take an HDFC Life Insurance policy when applying for a home loan with HDFC. Like most lending institutions, HDFC requires borrowers to have a life insurance policy in place for the duration of the loan. This measure is primarily to protect both the lender and the borrower's family in the event of the borrower's untimely death.
Why Do Banks Ask for a Life Insurance Policy?
Whenever you apply for a housing loan, the lender will ask you to assign a life insurance policy in their favor. This practice is used to secure the bank in case the borrower passes away during the repayment period. When the borrower passes away, the bank uses the death claim from the life insurance policy to offset the remaining Equated Monthly Installments (EMIs). This ensures that the bank's interests are protected, and the burden is lifted from the borrower's family upon their death.
What Happens If You Already Have an Existing Policy?
Typically, the bank will inquire if you already have an ongoing life insurance policy. If you do, the bank will require you to assign this policy to them as security for the loan. However, if the amount insured is insufficient to cover the total amount of the EMIs, the bank will ask you to take out an additional insurance policy to cover the remaining balance. In such cases, you do not have to purchase from HDFC; you can choose any other life insurance provider that suits your needs, such as LIC, Kotak, ICICI, or others.
What If You Have No Existing Policy?
For borrowers without any ongoing insurance, the bank will insist that they take out a fresh life insurance policy with the insured amount equal to the total EMIs. HDFC has the right to ask for such a policy, but they cannot force you to use HDFC Life Insurance specifically. You can opt for any other insurer that meets your criteria.
Historically, HDFC has been known to promote their insurance products more aggressively. They may be leverage your lack of knowledge in the subject to increase their insurance business. If you feel that they are trying to hard sell the policy to you, politely decline and explain that you are still shopping for the best insurance policy that suits your requirements. You can always assign that policy in their favor once it is finalized.
Is HDFC Life Insurance the Right Choice?
While HDFC Life Insurance is a reputable product, it is not the only option available. The premium of their policies is neither more nor less than what other market players offer. If you are satisfied with the terms and conditions offered by an HDFC Life Insurance policy, then by all means, go for it. However, comparing other options can help you find the best fit for your financial situation.
We wish you good luck with your housing loan application and hope that this information has helped clarify any doubts you might have had.
Like us if you found this information valuable!