Is it mandatory to have a guarantor or LIC Policy for loan?- Property Hotline

Be Un Confused

Expert: Harsh Roongta, Chartered Accountant and a SEBI registered Investment Advisor

Question: My friend applied to LIC Housing for a home loan of Rs12 lakh to purchase a newly built-up flat in Howrah, West Bengal. All the processes are almost complete. He has received loan approval via SMS. Currently, LIC Housing is telling him to assign an LIC Policy or to find a guarantor on his behalf. Is it mandatory?

Answer: Life Insurance is not mandatory as per guidelines from NHB (which governs LIC Housing Finance). However, it is in your own interest to take a term insurance to ensure that your family inherits your home and not your home loan in the event of your death during the loan term. You can buy a single premium term insurance policy from any insurer (not necessarily LIC) for the loan tenure. However if you buy it from LIC it is possible that LIC housing Finance may lend you the money for the one-time premium and recover it in easy EMIs along with the home loan. So though the term insurance policy from LIC may be expensive it may be more convenient and easy to pay for. Just make sure that you buy a term insurance policy and not an investment cum insurance policy.