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HDFC's |
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Loan Cover Insurance Policy |
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It was the dream of Mehek to own a house. Being the only earning member of her family she saved from the beginning of her career days to buy a house. Considering her stream of income and the host of tax sops associated with home loans she decides to avail a housing loan for the purpose of investment. Mehek's family were happily dreaming of the time when they would begin their life in their home - their own home! The very thought of moving to their own house gave them immense happiness and satisfaction! However, fate had other plans for the Mehek and her family. In a dreadful accident Mehek dies. The only income to her family is lost and consequently the monthly instalments could no longer be met. The aftermath was the mortgage of the house! That was indeed a very painful moment for her family. The sorrow of losing Mehek and the house in quick succession proved to be devastating for the family. |
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Given the diverse nature of the financial market and insurance in particular it is very essential to exploit the diversity to ones own advantage. In the given case the best possible solution would have been to take an insurance against the loan. A number of insurance companies offer insurance against loans. The primary objective of such an insurance is that in case of death of the person, the obligation of repaying the loan will be taken by the insurance company. Hence the family need not worry about the repayment of the loan amount. A number of insurance companies are offereing such policies. This issue covers one such specific company which is "Loan cover insurance policy offered by HDFC Standard Life Insurance Company." |
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The loan cover term assurance plan provides a lumpsum on the unfortunate death of the life assured during the term of the plan. The lumpsum will be a decreasing percentage of the initial sum assured. As the outstanding loan decreases as per the loan schedule, the cover under the policy decreases as per the policy schedule. Since this is a non-participating (without profits) pure risk cover plan, no benefits are payable on survival to the end of the term of the policy. |
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The features of this plan are: |
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- Applicable ages for this policy are:
- Minimum - 18 years
- Maximum - 55 years
- Maximum age at expiry - 65 years
- The maximum age for a single premium policy is 60 years
- An important advantage of this policy is that it is quite affordable.
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The premiums payable on this policy is given below: |
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| Age of the life assured |
Loan for a 10 year term |
Loan for a 15 year term |
| 30 years |
1,592 |
1,634 |
| 35 years |
1,757 |
1,799 |
| 40 years |
2,114 |
2,163 |
| 45 years |
2,782 |
2,915 |
| 50 years |
3,955 |
4,175 |
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The above premiums are for a male sum assured for an initial sum assured of Rs.3,50,000. |
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- Being a term plan there is no maturity benefits under this plan.
- The sum assured will be used to repay the amount of loan on death.
- This plan is not participating in nature. Hence there will not be any bonuses at the end of the policy term.
- There is the option of paying the premiums either on a half yearly or yearly basis. The policyholder can also consider a single premium payment option depending upon his convenience.
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In case of a single premium policy the rates will vary accordingly. The premiums in the case of a single premium policy is: |
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| Age |
10 year loan |
15 year loan |
| 30 |
5,781 |
7,993 |
| 35 |
6,324 |
9,152 |
| 40 |
8,515 |
12,991 |
| 45 |
10,636 |
16,663 |
| 50 |
15,921 |
25,038 |
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The above are the necessary features of the loan cover term assurance policy offered by HDFC Standard Life insurance company. Thus it is financially prudent to take an insurance against the loan amount to prepare for any eventuality or contingency as the case may be. |
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