What is a mortgage redemption policy?
Raj Kumar Sharma, Lucknow
This is a type of life insurance policy that is available when you take a home loan (mortgage) and is linked to the loan repayment. The policy works in such a way that the insurance cover matches the outstanding loan at any given time. This way, the policy pays out to the bank, which is the nominee in such policies in case of eventualities to the policyholder, who is also the borrower. The policy has no surrender value or survival benefits. If the policyholder dies during the term of the policy, all outstanding loans declared at the beginning of the policy are payable by the insurer as per the prepared schedule. Many lenders and banks insist on this policy when you are taking a home loan. Some even talk you into taking this as part of the loan, which you should not, because in such a case the premium is also added to the loan, which you then land up paying through the loan tenure and is an expensive proposition.
Depending on your age and the home loan you have taken, decide on taking this policy. You could also take a pure term insurance to match the loan outstanding than take this policy.
