National Housing Bank (NHB) and Insurance Institute of India (III) are working together to build a broader framework that would reduce home loan rate by 0.5% if the buyer opts for a home insurance. As per the director of NHB, surveys are being conducted to assess the feasibility of home insurance. Studies are being made if insurance can help in reducing loan rates.
A home insurance will bring down the risk premium of lenders, which can be passed on to buyers. Since customers prefer paying low-cost premiums when compared to higher coverage, such a plan would attract lot of potential buyers. At times several banks and lending institutions compel buyers to buy home insurance policies.
The recent natural calamities in different states of India have also emphasised the importance of home insurance as a risk mitigation instrument for various stakeholders. According to an executive associated with the matter, the exercise has almost reached mid way and although not concluded yet, the benefits could be at 0.5%.
If the measure gets finalised, it should help borrowers. It would help them not only to improve their risk profile but also to expand their loan credibility with lower interest rates. Such transparent and seamless in home insurance will boost customer confidence in financial institutions.
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