There are several advantages of such products. There is ease of purchase because it is an ancillary benefit in the overall borrowing process. So, you are unlikely to be rejected. “Being a group insurance product, the paperwork is minimal, and hence the issuance of the policy is hassle-free. In case of a claim due to an unfortunate event, Bank/NBFC as a bancassurance partner usually gets involved. Hence it becomes convenient for the nominee,” Badami points out.
And there are no premium payment worries since it is a single premium product. “The EMI of your home loan may include this as well. Thus, you don't have to keep in mind the premium payment schedule as in a standalone term plan,” says Naval Goel, CEO, PolicyX.com. And there is ease in claim settlement as well.
Term plans: In comparison, buying a pure term life insurance could be tedious. One may have to find out the product that best suits his/her needs, and may have to undergo a battery of medical examinations before the policy lands in his hand. This could be an uphill task if the borrower is not a young individual and sum assured is significant, typically in excess of Rs 1 crore.
“A bundled life cover along with the home/personal loan may come in handy in the event of the untimely death of the policyholder. However, a bundled product may not provide as much coverage and fall short of the policyholder’s requirement. The advantage of having a standalone term insurance policy is that when bought at a young age, the premium is quite cheap for a much larger cover,” says Santosh Agarwal, Chief Business Officer- Life Insurance, Policybazaar.com.
Also, the sum assured offered on term life insurance remains constant for the entire policy tenure. But the sum assured for the MRTI keeps falling as you keep paying the loan.
In case of balance transfer: When one takes a loan from lender A, but wants to shift to lender B for lower interest rates or service quality or any other reason, the MRTI cover does not shift, and the new lender may make the borrower buy a new cover- often bundled with the home loan.
If you have bought a term life insurance cover on your own, you can continue with the same. If you are young, it is ideal to buy a large term life insurance cover. But if you want to keep the loan liability separate and want to go convenient way, then MRTI could be the solution.