Mandatory loan Insurance Schemes
Loan insurance, Do banks fool you while availing a loan? Read this article and clear all doubts
In the present scenario, opting for loans are very common, whether to purchase a house, to go for higher study, buying a car, crop loans or business loans. We all have taken a taste of borrowing from some or the other lender. While we talk about loans, we should know about Mandatory loan Insurance Schemes.
While availing loans or credit limits, there are some insurances which we are compelled to opt for. There is always a confusion in our mind whether that insurance is mandatory or whether the lender has fooled us. I have tried to explain the necessity and benefits of insurance. Also, about Mandatory loan insurance which can be opted while availing a loan facility.
Property Insurance –
- This is one of the Mandatory loan Insurance Schemes which we have to opt in while availing a loan facility in which property is involved like home loan, mortgage loans etc.
- This loan is provided to insure the building is constructed to secure the value of the loan. In case of damage to the building the repair cost or the whole building expenses can be covered from the insurance and paid to the loan account.
- Since the cost of the building gets down by the time, the insurance is done after analyzing factors like present value of the building and the loan amount.
- This insurance is generally done by a company which is empaneled by a lender.
Vehicle Insurance –
- When we avail a vehicle loan like car loan, commercial vehicle loans, agriculture related vehicle loans, lenders ask for insurance copy. This is again a mandatory loan insurance scheme which borrower need to opt for while availing a loan facility. This is to secure the loan from theft of the vehicle or any damage.
- This insurance can be obtained from any of the insurance companies as per choice of borrower generally.
Goods/ Stock/ Live Stock Insurance –
- When one avails the facility against the stock (Generally business loans) like, Credit limits, business loans, dairy loans, cattle loans, poultry loans, etc., this type of insurance is mandatory to opt for.
- These types of insurance can be availed from vendors as per choice of borrower generally. Copy of the insurance policy should be submitted to the lender.
Insurance of Borrower –
Some of the lenders force the borrower to get insured while availing a loan for the period of loan. This type of insurance is generally not mandatory and borrowers can not be forced to opt for. However, opting for insurance is always a beneficial thing.
Considering the life risk, a borrower can opt for his/ her insurance for loan period for full loan amount. In adverse cases this supports the borrower’s family financially and not to lose the asset acquired from loan as the complete loan amount will be repaid by the insurer company.
Crop Insurance –
Crop insurance is mandatory for the farmers who are availing facility of crop loans or finance against crops. The crop loan is generally to be obtained from “Pradhanmantri Fasal Bima Yojna (PMFBY)” in which part of the insurance premium is shared by the government. It’s mandatory to opt this insurance while availing a loan facility. However if you are not willing to opt for the scheme you have to submit it in writing to the lender.
After reading this article, I expect that you now must have a lot more useful information and a clear picture about insurance protection for a loan. And now you can make a much more informed decision about it. In my opinion, opting for insurance is always a wise option as it gives you a much-needed cushion against any miss-happenings. It saves your family from your liabilities and suffering because of it.
You should always check affordability and scheme before availing insurance. Compare different policies and plans and take which suits you best.
Other Posts:
- Cash deposit limit in savings account for individual
- Bank’s NPA recovery process and borrower’s rights!
- What does -1 CIBIL score mean
- Cyber Fraud: Type of banking fraud, Recover lost money
- All Government Schemes in India
Important links related to this article are here under –
- https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=7402&Mode=0
- https://www.irdai.gov.in/
- https://www.investopedia.com/mortgage/mortgage-guide/mortgage-insurance/
- https://financialservices.gov.in/insurance-divisions/
- https://pmfby.gov.in/ceo/dashboard
Read Category-wise posts
Banking | Bank Account | Bank Deposit Schemes | Loans | Bank Cards | Credit Cards | Debit Cards | Search IFSC & MCLR Code | Insurance | Bank Jobs and Exams | Stock Market | GST | EMI Calculator
