When taking a home loan, ensure all co-borrowers have life insurance


When giving a home loan, lenders insist that the primary borrower should have a life insurance policy. A borrower can either take a life insurance plan from the lender or submit a copy of their existing policy if they already have one.

However, if there are co-applicants in the home loan, they, too, should have a life insurance. The recent deaths due to covid-19 have shown that it’s always better if all borrowers are covered.

Take the example of a husband and wife who took a home loan together several years ago, where the wife is the primary applicant as both were working then. The lender forced her for a life insurance policy, which she availed. The husband was the co-applicant, and the lender didn’t insist on him taking life insurance.


After a few years into the loan, the wife stopped working. The husband continued paying the equated monthly instalment (EMI).

During covid, the husband passed away. Now, the wife (primary applicant) is alive and has an insurance cover. But the earning member passed away without any insurance to take care of the family’s liability.

Such instances are common, especially among couples where the husband is a business owner and the wife is salaried. Banks offer better rates to salaried and also to women.


Take the example of the State Bank of India. According to its website, the loans to non-salaried are expensive by 15 basis points (bps). It also offers a 5 bps concession to women. One basis point is one-hundredth of a percentage point.

It’s, therefore, best to take life insurance policies for all co-borrowers, and the sum assured should be large enough to cover the home loan and provide for the family in case the breadwinner dies.

(Do you have personal finance queries? Send them to [email protected] and get them answered by industry experts)


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