Customers in India can obtain home loans from any bank. You can quickly get a house loan with a small amount of paperwork and good credit. Banks occasionally require that customers buy house insurance coverage in addition to a loan.
The banks will advise you that you must have homeowner’s insurance to be eligible for a house loan. If you don’t get insurance coverage from them, some banks can even refuse to offer the loan.
Unaware of whether or not it is required, people frequently agree to the bank representative’s demands and purchase a home insurance policy from them.
But is it actually required? Let’s have a look.
It is not required to purchase home insurance from a designated bank
Contrary to what the bank states, applicants for house loans are not required to purchase any insurance from the bank. Both the Reserve Bank of India (RBI) and the Insurance Regulatory and Development Authority of India (IRDAI) have not made any such compulsions for home loan applicants. Visit the official website of IRDAI for further details.
No restrictions on internal guidelines
Banks can set their internal standards for granting a customer a home loan. Home loan borrowers may be forced to purchase home insurance, but only as a matter of internal bank policy. They are not allowed to advertise it as an RBI or IRDAI directive.
Banks can create a guideline requiring borrowers to have an insurance policy to protect their homes for their loans to be approved. They cannot, however, make it mandatory for the borrowers to purchase policies from them only.
Purchasing home insurance coverage from the bank where you have applied for a mortgage may not be a good idea. Banks charge you a greater rate for home insurance than you might get elsewhere.
You can compare various house insurance policies outside of the bank based on cost and coverage to choose a policy that best meets your needs. Additionally, you may use a home insurance premium calculator to determine the price for your policy based on the dimensions and other characteristics of your house and its contents.
How should you respond if the bank compels you to purchase home insurance from them?
There are options available if the bank where you applied for a mortgage forces you to get home insurance from them. Understand what home insurance covers and contrast the bank-provided house insurance policy with other available options.
You can purchase the insurance from the bank if there is only a slight rise in their premium because it is more convenient.
According to the rules set forth by the RBI and IRDAI, you can inform the bank representative that you are not required to get house insurance from the bank that provides your loan. You can complain to the bank manager if the representative is still adamant.
To Sum It Up
Realizing your dream of owning a home requires financing by way of a home loan. If your bank is putting a barrier in your way by requiring you to purchase insurance from them, you must let them know that you are aware that this is not required by the RBI or IRDA regulations. When purchasing a house insurance coverage, you must also conduct extensive comparisons and make a well-informed decision.
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.