Loan cover term policy is the insurance policy that can cover the home loan. This policy can cover the amount of home loan of the individual in the case of the eventuality. On such policy the cover keeps on reducing with time as the individual keeps paying the EMIs regularly that reduces loan amount.
The policy provides the lumpsum in the case of the death of life assured throughout the term of policy. The lumpsum is the decreasing percentage of initial sum taken according to policy schedule. As this is the non participating means without the profit and pure risk cover policy, there are no benefits payable on the survival to an end of term of plan.
Premium of the loan cover term policy is prepared in the manner to cover a superb amount of loan. Therefore size of insurance cover rejects as term of loan draws to the close. So, loan cover term policy has the lower premium in comparison with the term assurance policy which does not offer the investment returns.
In loan cover term policy, loan is taken to cover an expense which is acquired in some of the activities of individual. The motor loan can cover some or entire amount which went in to purchasing a vehicle. The home loan can cover costs which are incurred by an individual when building or purchasing a house. When the loan has taken, it requires repaying with an interest within a term particularized.
When a debtor is unable in repaying the debt because of some valid reason or suffers the premature death, then loan cover term policy will take care of repayment. To start with, on loan cover term policy there is the loan amount. This forms premium. If you have taken this policy then you have to give the fixed sum each month to cover the premium. It is known as the equated monthly installments (EMI). The loan amount decreases with EMI payment.
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