Mortgage Disability Insurance

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The mortgage disability insurance is a special type of life insurance policy and is gaining huge popularity in the Indian mortgage industry. The mortgage disability insurance is a special type of life insurance policy that guarantees repayment of a mortgage loan in the event of disability of the person who borrowed the mortgage. Further, the mortgage lender can also protect his loaned capital through these special type of insurance instrument.

This type of specialized mortgage disability insurance products are of two types, viz.

  • Private Mortgage Insurance
  • Mortgage Insurance Premium
Private Mortgage Insurance – are mortgage disability 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 disability insurance products that also protects the lender in the event of non-payment due to disability of the mortgage borrower. These life insurance products are generally government insurance products.

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 disability insurance in India. This mortgage disability insurance products comes as a package with mortgage life insurance products as whole, where the mortgage borrower or the insured is also covered for life. This is the most popular type of mortgage loan 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. Private financial institutions like, commercial banks both National and Foreign Banks along with Cooperative banks and other non-banking financial companies are also registering steady growth since 2000. The Indian mortgage loan industry is consistently registering 20-50 % growth on year-on-year basis, from the year 2000 onwards. Much of the success of the growth of this industry in India can be attributed to the Government of India liberal economic policy promulgated in the early 1990s.

The business of mortgage life 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 advantages in owning a house. The main bottlenecks that are hampering smooth growth of this industry in semi-urban India, are as follows -
  • Ignorance amongst masses
  • Poor accessibility
  • Lengthy processing time
  • Elaborate documentation

Last Updated on 5/26/2011