Mortgage Insurance

The mortgage insurance is a special type of insurance policy and is gaining huge popularity in the Indian mortgage industry. The mortgage insurance is a special type of insurance policy that guarantees repayment of a mortgage loan in the event of death or disability of the person who borrowed the mortgage. The tenure of payment of such mortgage insurance is usually of 12 months and in some cases it goes higher up. Furthermore, the lender can also protect his loaned capital through these special type of insurance instrument. This type of specialized mortgage life insurance products are of two types, viz.

• Private Mortgage Insurance
• Mortgage Insurance Premium

Private Mortgage Insurance – are mortgage life insurance products that protects the borrower from the lender in the event of default which generally, covers a substantial portion of the capital borrowed. They are insurance products of private insurance companies.

Mortgage Insurance Premium - are mortgage life insurance products that also protects the lender in the event of non-payment due to some unfortunate event. These life insurance products are generally government insurance products.

The following types of rates are prevalent in the Indian mortgage insurance market -

Fixed Mortgage Rate – in this case the rate of interest remains fixed throughout the loan term. The mortgage rates does not varies according to market conditions. In other words, the rate of interest is pre-fixed during the process of borrowing and it generally varies between between 12.5 % to 25 %.

Flexible Mortgage Rate - is one in which the interest rate varies according to market movements. This type of interest rate is called 'adjusting' or 'floating' rates. The risk factor is high in this type of interest rates.

Some of the well known mortgage financing companies operating in India are as follows -

• LIC Housing Finance
• HDFC
• ICICI Home Finance
• SBI Housing Finance
• UCO Bank
• Allahabad Bank
• United Bank of India
• Kotak Mahindra Bank
• Citi Bank
• Standard Bank
• HSBC

The predominant market leaders in organized Indian mortgage industry are housing finance companies like LIC Housing Finance, HDFC, ICICI Home Finance etc. And they are the main facilitator of mortgage insurance products in India. This is one of the most popular type of mortgage loan that is prevalent in India. The government of India, Life Insurance Corporation of India enjoys complete market leadership in this sector. The estimated size of the organized mortgage industry in India account only for 25% of the total housing investment in India. But commercial banks both National and Foreign Banks along with Cooperative banks and other non-banking financial companies are also catching them up at a very fast pace. The Indian mortgage loan industry is consistently registering 20-50 % growth on year-on-year basis, from the year 2000 onwards. The business of mortgage insurance is mainly concentrated in the urban India only. This is because the semi-urban or semi-rural India communities are still ignorant and skeptical about its pros and cons. The government of India is amending its insurance policies to eradicate these bottlenecks and ensure steady growth of the Indian mortgage insurance industry.

Last Updated on 5/26/2011