Mortgage Life Insurance

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The mortgage life insurance is a special type of insurance policy and is gaining huge popularity in the Indian mortgage industry. The mortgage life 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. Further, 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 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 life insurance products in India. This is 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 (NBFCs) 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 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 pros and cons. The main bottlenecks that are hampering smooth growth of this industry are as follows -

  • Ignorance amongst masses
  • Poor accessibility
  • Lengthy processing time
  • Elaborate documentation
Prior to 1990 the mortgage loan market in India was an unorganized industry in India. But today, the mortgage loan sector in India is witnessing steady growth and the projected size of the mortgage loan industry is estimated to be US $ 18 billion.

The growth of the real estate industry requirements has fueled its growth. The industry is heating up and there is a mad rush for mortgage life insurance, especially in urban India and the market is estimated to grow at a lightening pace in few years to come. The proportion of outstanding housing loans as percentage of GDP increased from 3.4 % in 2001 to 7.25 % by the end of 2005. The growth trend is still persisting in the current fiscal and promises to raise its bar higher by the end of the financial year 2007-2008.

Last Updated on 5/26/2011