I took a home loan from a private bank. I would like to opt for a home shield.

This is an insurance product which remains in sync with the outstanding loan. The premium payment is done upfront. 

 This is not a term insurance from any of the life insurance companies. It is a product offered by the bank itself.

Will I be able to claim any income tax benefit on the amount of premium
paid?

 Once again, the entire premium amount will be paid upfront.

 - Kamlesh Khanchandani

Premium payments for life insurance schemes are eligible for deduction under Section 80C.

The wordings used in Section 80C are that the deduction is available in respect of 'any sums paid or deposited in the previous year by the assessee 

(i)  to effect or to keep in force an insurance on the life of the persons specified in sub-section 4...'

Nowhere does it mention that the life insurance has to be bought from only a recognised life insurance company.

Hence, in my view, the deduction will be available.

Though this is the position strictly from an income tax point of view, banks are not allowed to offer insurance policies. I am sure the bank in question must be offering a policy from an IRDA recognised life insurance company for which it has tied up on a group basis.

In any case, the base policy would be written by a life insurance company and the bank must only be issuing a participation certificate for the same.

For readers wishing to know more about home loan insurance, Get Ahead adds this information.

In home loan insurance, the loan is insured not the home.

What this insurance takes care of is the amount you will owe the home loan company or bank.

Also, what you have paid is not taken into account; just what has to be paid.

Let's say you took a home loan of Rs 10 lakh (Rs 1 million).

Let's also assume that after you pay up Rs 2,00,000 of the principal amount, you meet with a fatal accident. This means, a balance of Rs 8,00,000 still has to be paid to the home loan company. This is the amount the insurance company will cough up. They will not pick up the tab on the entire amount (Rs 10 lakh), only the balance amount owed (Rs 8 lakh).

An exception is ING Vysya Bank's [Get Quote] home insurance loan. In the event of something unfortunate happening to you, not only will the balance loan amount be paid off, your family will also receive the principal amount that has already been repaid on the loan (Rs 2 lakh in the above example).

This way, your family is not left without a roof over their head; neither do they have the hassle of paying up the Equated Monthly Installment (monthly payment to be made to the home loan company).

Of course, like any insurance policy, a premium will have to be paid. The insurance companies and home loan companies are not too forthcoming with how much this will cost, but say the premium will be decided on a case-to-case basis.

This premium will depend broadly on four conditions:

1. The age of the person taking the loan: The older you are, the higher the premium.

2. The loan amount: The larger the loan amount, the higher the premium.

3. The tenure of the loan: The longer the repayment period, the higher the premium.

4. The medical record of the individual: If you are in good health, the premium will be lower. For instance, if you have already had a heart attack or are in the high risk category, the premium will be higher.

• To find out more on the subject, read Have a home loan? Insure it.

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