Mortgage insurance’s relevance in India
By Joseph Samson
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The premium amount is financed by the lender and the customer repays this amount as part of the EMIs. In case of joint borrowers, insurers offer covers proportionate to their shares of loan. These policies are offered in conjunction with the bank, which means that it cannot be purchased separately by the borrower from the life insurer. For example, SBI life will offer this product only to those who have availed loans from SBI life and ICICI Prudential Life Insurance will only offer this product to those who have availed these loans from ICICI bank.

The premium is calculated taking into account the loan amount, borrower's age and tenure of the loan. The customer can choose the initial sum assured equal to the loan amount or the amount outstanding. For instance, if a 30-year-old female wants to buy this cover for a home loan of Rs. 40 lakh and a tenure of 15 years, she would be required to pay a premium of Rs. 65,400.

In the event of death of the policyholder during the term of the plan, the benefit based on the original EMI is payable. The benefit is used to pay the outstanding loan amount and if there is any surplus left, it would be given to the nominee.

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