Online home loan insurance vs bank plans: Savings can go up to 72%

Data highlights sharp premium differences between online and bank-sold home loan insurance

Home loans are now a long-term financial commitment for most urban Indian households. As loan sizes grow and tenures stretch to 20-30 years, protecting the family from repayment risk in case of a borrower’s death has become an essential part of financial planning. This is where home loan insurance comes in. However, the way this cover is bought, online or offline, can make a material difference to cost and flexibility.

 

According to data shared by Policybazaar.com, online home loan insurance is emerging as a significantly cheaper and more transparent alternative to traditional offline covers sold by banks.

 

How offline home loan insurance works

Offline home loan insurance is usually offered by banks at the time of loan disbursal. In many cases, it is bundled with the loan and presented as a standard requirement. Customers typically have limited visibility on pricing or product features.

 

 

Key characteristics include:

Higher premiums, often loaded with commissions and administrative costs

 

-An 18 per cent GST component added to the premium

 

-Rigid structures that do not adjust easily if the loan is prepaid or refinanced

 

-Claim payouts that may be linked directly to the lender rather than the family

 

Because of this structure, borrowers may end up paying for insurance even after closing or reducing their loan 

 

Why online home loan insurance is cheaper

Online home loan insurance is sold directly to consumers, without intermediaries. This reduces distribution costs and allows insurers to price products more efficiently.

 

Policybazaar.com says online plans can be up to 72 per cent cheaper than offline options over a 20-year loan tenure. For a 30-year-old borrower with a Rs 1 crore home loan at an 8 per cent interest rate:

 

-Offline insurance can cost about Rs 5.98 lakh over the policy term

 

-Online insurance costs roughly Rs 1.6 lakh for the same cover

 

A major factor behind this gap is zero GST on online home loan insurance, compared with 18 per cent on offline plans 

 

Flexibility and customer control

-Beyond cost savings, online home loan insurance offers greater flexibility:

 

-Premium payment terms can be aligned with the borrower’s cash flows

 

-Policies can be adjusted or closed without penalty if the loan is foreclosed

 

-Coverage can be customised to match the outstanding loan amount

 

Another key difference is claims. Online policies allow borrowers to choose whether the payout goes directly to the family, giving them financial control during a difficult period, rather than routing funds only through the lender. 

 

Awareness remains low

Despite these benefits, awareness of online home loan insurance remains limited. Many borrowers are unaware that they can buy loan protection independently, without bundling it with their home loan.