Home loan protection plan (HLPP) is a good insurance product that helps give cover to a home loan borrower, in case he/she dies. The home loan protection plan is also called mortgage life insurance policy.
Although in no way mandatory, this plan is advised for any individual who is taking a home loan. By taking this HLPP, a borrower ensures that his/her family doesn’t face any financial burden (owing to the home loan) in case of his/her demise.
This is increasingly becoming a common norm wherein bank officials push such plans saying that it is compulsory for availing home loan from the bank. Here’s what you can do:
- Ask the bank official you are communicating with to give the bank’s policy about mandatory purchase of insurance in writing. You can tell the official that you are aware of the rules and ask him/her to give this in writing. If the bank policy does not mandate the purchase of insurance for availing home loan, the official will not be able to give you this in writing.
- Ask the official to show the relevant clause in the loan agreement which mentions about the purchase of HLPP. Please note, the loan may have a clause for mandatory purchase of property insurance and not HLPP. Do not get confused because HLPP is different from home or property insurance.
- Escalate to Senior Management: If the bank official refuses to give this in writing and still insists, you can drop an e-mail to senior management, preferable MD/CEO of the bank. Senior management of a bank is extremely concerned about the retail customer satisfaction and likely to swing into action within a few hours. E-mails also help you maintain a written record for conversation. This written record can also be used if the situation needs to be escalated
- Pretend to reject the loan: Everybody has targets and bank officials are no exceptions. Though the sale of insurance plan would have sweetened the deal for the bank official, a home loan sanction still goes towards meeting their targets. A bank official would not like to lose a customer simply because you declined to purchase insurance policy from them.
- Return the policy within the free-look period: All loans have a free-look period which is the grace period you get after having bought a policy to return it. All insurance policies have a free-look period of 15 days. You can return the policy after deduction for pro-rata life coverage provided (number of days policy was in force), expenses on medical examination and stamp duty charges. As there can be certain operational hassles, use this only as the last resort.