Life is full of uncertainties, but you need to devise ways to manage the risks arising out of these issues. A life insurance policy is one such means of providing financial security to the family in case of any eventuality like the sudden demise of the breadwinner. To get the benefit when needed, you should know and understand life insurance plans & policies in India.
What is Life Insurance?
Life insurance provides financial protection to the family in cases like the sudden death or the permanent disability of the main earning member of the family. Thus, it is an assurance that the insurance company will take care of the financial well-being of the family members even when the breadwinner is not around. This is done by paying the sum assured to the nominee or the beneficiary. The insurance can also cover other contingencies like critical illness and permanent or temporary disability. The policyholder is called the insured, while the insurance company is called the insurer.
A life insurance policy helps in meeting three goals in life. Let us look at them:
What is Life Insurance Premium?
A premium is the amount paid to the insurance company for getting a life insurance policy. The premium or the cost of the insurance is an important aspect to be considered before finalising a policy. It depends on various factors like age and gender. To reap the benefits of the insurance policy, it is important to pay the premium on time. In case of a non-payment or a payment delay, the policy can be considered as a lapsed policy. However, before a policy happens to expire, you usually get a grace period of 30 days. The payment mode can be regular or single. A regular payment can be monthly, annually and so on. Let us understand some factors on which the premium depends.
Age: This is an important deciding factor while buying an insurance policy. Older you are, higher the premium amount. Accordingly, younger people have to pay lower premium amount for a life insurance policy.
Gender: Premium amount for women is lower compared to that for men.
Smoker/Non-smoker: In case you are a smoker, the premium will be higher because you are prone to higher risks in life. Thus, a non-smoker has to pay lower premium.
Sum assured: Higher the sum assured or the death benefit, higher the premium amount to be paid.
Policy term: If the policy is for a longer duration, the premium amount will be higher.
Type of Life Insurance Policy?
Life insurance is of 7 types. And each has its own features and specialties. You can choose them as per your need and requirement. They are: Term Insurance, Whole Life Insurance, Endowment Policy, Money Back Policy, Child Plan, Retirement or Annuity Plan and United Linked Insurance Plan (ULIP).
Term Insurance
Term insurance is a pure protection plan where the beneficiary gets the sum assured, also called death benefit, if the policyholder passes away during the term of the plan. However, if the insured survives the term plan, the coverage also ends, with the beneficiary not getting any money. Even the premium paid is not refunded to the insured.
However, there are some term plans where the premium paid is returned, if the policyholder happens to the survive the plan. This payment is termed as survival benefit. The premium for such plans are quite high. Otherwise, a pure term plan is one of the most affordable plans compared to other types, as the amount of the premium is quite nominal. One can opt for regular payment or single payment mode.
3 Types of Term Insurance
| TYPES OF TERM INSURANCE | ||
| Level Term Insurance | Decreasing Term Insurance | Increasing Term Insurance |
| Sum assured for the beneficiary remains constant throughout the term of the plan. Even the premium and renewal premium remain same during the term | Sum assured decreases with time and the premium amount remains constant. Example: credit life insurance, mortgage redemption policies | Not just sum assured, but also premium amount increases with time |
Whole Life Insurance/Life Cover Insurance
Under this policy, the insured is covered for the lifetime, i.e. till his/her death. The maturity age is usually 100 years. Thus, you need to keep paying the premiums till 100 years of your age. Here, the beneficiary gets the sum assured along with maturity benefits on the untimely demise of the policyholder. On the other hand, the policyholder gets to enjoy the survival benefits, in case he/she happens to survive the policy term. A whole life insurance plan offers benefits in both the cases – when the policyholder survives the policy or on his/her sudden demise during the term.
2 Types of Whole Life Insurance
Endowment Policy
This offers both coverage and a means for saving. Like any other life insurance plan, here, the beneficiary gets the sum assured in case of the death of the insured. However, if the insured survives the plan, he/she gets the maturity benefit. The policy can be both participating, where the insured gets bonus and dividends from the company, and non-participating, where the insured does not get bonus and dividends from the insurance company. An endowment policy can also be a ULIP, where a part of the premium is invested in market apart from a part being used in coverage.
Money Back Policy
In this policy, the insured gets a certain percentage of the sum assured at regular intervals during the term of the policy. If the insured survives the tenure of the policy, he/she also gets the sum assured irrespective of the percentage of the sum assured already paid out to him/her. Thus, at the end, the insured gets the sum assured along with the accumulated bonus.
And in case of the death of the insured during the term of the policy, the beneficiary gets the full sum assured regardless of the number of premiums paid. It is one of the expensive policies, as it provides benefit to the insured during the term period along with the long-term benefits of usual life insurance plans. A money back policy provides benefit to the insured in between the term of the insurance which he/she can use for meeting various financial goals.
Child Plan
People can take this insurance plan if they want to save money for the future of their child along with getting a coverage for the breadwinner. It is a combination of savings and insurance, where the insured can use the money for the future needs of the child like higher education. The investment in this plan do not have any vesting age – one can start investing soon after the birth of the child and one can withdraw money after the child reaches a certain age. Some child policies offer intermediate withdrawal options as well. This can be either a ULIP or an endowment plan.
Retirement or Annuity Plan
Taking insurance policies for the sake of the family is not enough. One should also keep one’s old age in mind. When you are young you have a regular source of income, but during old age the situation can change. So, one needs to plan for the retirement also. Along with coverage, retirement or annuity plans give the option of saving and investing money which can be used in the old age. Life insurance companies in India provide retirement plans which help create a corpus from which a regular income, called annuity or pension, is given to the insured after reaching a certain age.
Retirement plans can be availed “with cover” or “without cover”. The first plan offers a sum assured to the beneficiary and the “without cover” one gives the corpus amount to the beneficiary only after the death of the insured.
2 Types of Retirement Plans
Unit Linked Insurance Plan (ULIP)
Unit Linked Insurance Plan (ULIP) offers dual advantage – coverage and a means of investment. Under this plan, the cash value/paid up value of the policy depends on the current asset value. The total premium paid by the insured is divided into two parts: one that is invested in the market or debt funds and the other that is used for insurance. The type of investment is selected by the insured depending on the type of risk that he/she is willing to take.
On basis of investment:
On basis of death benefit:
Other Type of Life Insurance
Group Life Insurance
Group life insurance is a type of life insurance that covers a group of people. It is mostly provided by companies to its employees. As the insurance is done in a group, a group life insurance is considered cost-effective. The group can comprise lawyers, members of cooperative banks, societies, doctors, etc. This life insurance can be contributory, where the employees contribute along with the employer in the payment of the premium, or non-contributory, where the employer pays the entire premium amount.
Life Insurance for Senior Citizens
You can brave various situations of life when you are young; however, in old age you need more protection and security. To manage such circumstances of life in old age, life insurance for senior citizens can be a good option. The insurance also provides financial coverage at times of need. For instance, in case you do not have any support for your spouse, life insurance for senior citizens can provide financial security to the spouse in case of your sudden demise. The death benefit can also be used to manage loans, debts and other financial needs.
Home Loan Balance Transfer helps you reduce your EMIs by moving your outstanding loan from other financial institutes to the one which offers lower interest rate.
Home Loan Balance Transfer or Refinancing or simply Balance Transfer is the process that allows you to benefit from the lower interest rate offered by the other lender. If you have an existing outstanding home loan with one borrower, you can make a home loan transfer, that is, shift the remainder amount to a different borrower who charges a lower rate of interest, the process is termed as a home loan balance transfer or refinancing. This unique home loan transfer service helps a customer avoid high applicable interest rates as listed by one home loan lender and migrate to a lower interest rate structure with another lender.
So why one would need a balance transfer? A home loan involves a significantly large amount of money and therefore, the interest rate on the loan is a matter of concern for everyone who decides to take a home loan. Home loan interest rates may be high so one of the most common ways to reduce interest rates is to either talk to the bank that has provided you with the loan to reduce it or go for a transfer of the balance on an existing home loan or in layman terms, shift your home loan to a bank offering lesser rate.
Key Features of Home Loan Balance Transfer
The most important benefit of availing a home loan balance transfer is saving money. The difference in interest rates between the two lenders, the tenure of the loan and the amount outstanding are the three primary contributing factors. If you see a significant benefit in the home loan interest rate, it may well be worth considering a switch to the new home loan lender. You must first and foremost identify the objective for availing of a balance transfer of your loan. Then you must just ensure that your new home loan helps you bring down your overall cost of acquisition. The reason of switching the lender could include:
Any salaried, self-employed professional or self-employed businessperson with an outstanding home loan that has been regularly serviced can apply for a home loan balance transfer. Though all loan providers have different eligibility criteria, some basic ones are as follows:
Your home loan balance transfer is treated similar to a fresh home loan application by the bank you are transferring the loan to. Therefore, while applying for your home loan to transfer to another bank, all the documents provided during the initial home loan application need to be resubmitted. These documents are then revalidated and vetted by the bank or NBFC providing the loan transfer facility. Documents are the most important element while taking up a loan because they best help the bank to identify the loan borrower to make sure of their loan borrowing and loan repayment capabilities. The prerequisite key documents for home loan transfers are the following:
Home Loan Balance Transfer Rates of Top Lenders
Lender | Lowest Balance Transfer Rates | Processing Fee (Exclusive of GST) |
Kotak Mahindra Bank | 6.50% onwards | Up to 0.50% of the loan amount plus statutory dues |
LIC Housing Finance Ltd. | 6.66% onwards | As applicable |
ICICI Bank | 6.75% onwards | Processing fee of 0.50% of the loan amount plus applicable taxes. |
State Bank of India | 6.75% onwards | Up to 0.4% of the loan amount (Min. of Rs 10,000 & Max. of Rs. 30,000) |
HDFC Ltd. | 6.70% onwards | Salaried/Self Employed Professional – Up to 0.5% of the loan amount or Rs. 3,000, whichever is higher |
Bank of Baroda | 6.75% onwards | Flat: Rs 8,500/- (upfront) |
Union Bank of India | 6.80% onwards | 0.50% of the loan amount (maximum Rs.15,000) |
Axis Bank | 6.9% onwards | Up to 1% of the loan amount subject to a minimum of Rs. 10,000 |
Canara Bank | 6.90% onwards | 0.50% (Min. Rs. 1,500; Max. Rs. 10,000) |
IDFC First Bank | 6.90% onwards | Up to ₹10,000 |
Federal Bank | 7.65% onwards | 0.50% of loan amount (Min. Rs. 10,000; Max. Rs. 45,000) |
L&T Housing Finance | 7.7% onwards | 0.25% of the loan amount |
Standard Chartered Bank | 7.99% onwards | Up to 1% of the sanctioned amount |
IIFL | 8.20% onwards | Up to 2% of the loan amount |
Indiabulls Housing Finance Ltd. | 8.80% onwards | Up to 2% of the loan amount |
Yes Bank | 8.95% onwards | Up to 2% of the loan amount or Rs. 10,000, whichever is higher |
Piramal Capital & Housing Finance | 9.75% onwards | Up to 3% of the loan amount |
Home Loan Balance Transfer Interest Rates as of 5th October 2021.
The housing loan balance transfer rates in the table are subject to change anytime without prior notice
Guiding Steps to Home loan Balance Transfer:
Due to unalike interest rates offered by different banks and loan lenders for existing and new customers, several customers get upset with their high home loan interest rates. This is the point when you can consider a switch between banks and transfer your home loan to a bank offering lower rates compared to the existing one. Here is a guide to get you in the clear about Home loan Balance Transfers-
Step 1: Analyze cost benefits being offered Decide the viability of transferring your home loan by analyzing the current situation. Here are some guidelines to help you with the analysis:
Step 2: Get NOC from the existing bank Getting a No Objection Certificate (NOC) from your current home loan provider is a key step in the home loan balance transfer process. The other document that is necessary to complete this step of the balance transfer system is a foreclosure letter along with the complete list of documents held by the bank as well as your payment history. In some cases, your current bank may try to retain your business by offering you a reduced interest compared to what you are currently paying. Make sure you analyse such an offer as well as other offers thoroughly before settling on a specific one.
Step 3: Apply To New Bank Now you must have all the required documents ready to transfer existing home loan to another bank of your choice. You will also require getting a No Objection Certificate from your housing society or builder to be submitted as a proof of ownership to the bank along with all other documents. Then, bank will check your ability to pay the monthly installments. While making the application for balance transfer, you can decide to top up the balance on your home loan, reduce tenure or change your home loan EMIs.
Step 4: Credit Approval At this step, bank will evaluate your application and decide your eligibility for home loan transfer. Extensive background checks and history assessment will be carried out before they give you a credit approval. These verifications include re-evaluation of your home loan, checking your credit history, checking the authenticity of ownership and document valuation. Once the issues related to Credit Approval are resolved, the home loan provider would provide you with documentation that mentions key information such as the new loan interest rate, tenure and other features. Once this step is completed it is time you decided whether to go through with the balance transfer to stick to your current loan provider.
Step 5: Documentation with Chosen Loan Provider At this point, if you decide to finalise the home loan transfer process, you would be required to complete the documentation process with your selected loan provider. They may require a few extra documents to complete the whole transfer process. Here, you have your home loan transferred at a low interest rate and better benefits.
Banks are very careful when allowing shifting your home loan, especially banks which take on the responsibility of the transferred loan amount. And that is where PaisaBazaar can help you.
Our Home Loan Balance Transfer Calculator can help speed up your decision-making process by sifting through all the offers available based on the information provided by you. Our online tool automatically generates a comprehensive comparison report based on your requirements to help you make an informed decision. Our calculator takes everything into consideration, such as your total and outstanding loan amounts, remaining loan tenure and the existing rate of interest on your home loan. We will also provide you with the fine print of the transfer agreement to aid your decision.
Q. When is a home loan balance transfer a good idea?
Ans. The key reason for transferring a home loan from one lender to another is to benefit from a lower interest rate provided by the new lender.
Q. Is there a limit to the amount I can transfer?
Ans. Yes. The maximum balance transfer amount is equal to the outstanding amount of the home loan.
Q. When should I not consider transferring my home loan?
Ans. You must not consider shifting your home loan if one of the following is applicable in your situation:
Q. Does my current credit score affect my chances of successfully completing the transfer?
Ans. In case your credit score has dropped significantly since you applied for the initial home loan, it might affect the process. As the balance transfer process works similar to applying for a new home loan, your credit score and history would play a key role in determining your eligibility for the home loan balance transfer.
Q. Will my refinance be affected by the prepayment penalty?
Ans. Most banks today wont have a prepayment penalty in the first place. But if your bank has it, then you can ask your new lending bank to take it into account. This will vary from bank to bank.
Q. How much time will it take to transfer my home loan from another bank?
Ans. Transferring a home loan is treated like buying a home loan all over again by the bank, the loan is transferred to. Therefore, it might take 15-20 days for the home loan to be transferred to the new bank.
Q. What is a top up loan?
Ans. For instance, if the property value of your home climbs much higher from its original price at the time you took the home loan and you might require more finance for your home renovation. In this situation you can add to your loan. This is called a loan top up.
Q. Can I get a top up on my loan along with the transfer?
Ans. Yes, depending upon your eligibility, the loan issuer can offer you the option to top up on the home loan to be transferred to the new bank but there may be processing and legal charges applicable.
Q. What processing fee is charged on home loan transfer?
Ans. Processing fees on transfer of home loans range from 0.5% to 1% of the loan amount.
Q. Is there any interest saving in EMI by home loan transfer to another bank?
Ans. The precise reduction in EMI varies based upon:
Q. What steps does a home loan takeover involve?
Ans. The simple steps following below are involved in transfer of your loan:
Q. What precautions must be taken when transferring a home loan?
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