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Ensure your home loan is insured

The next time you take a home loan, and your bank insists on insuring the loan, make sure the insurance company has accepted the policy — otherwise you risk losing your house, reports Kanchan Chaudhari.

mumbai Updated: Nov 29, 2009 01:56 IST
Kanchan Chaudhari

The next time you take a home loan, and your bank insists on insuring the loan, make sure the insurance company has accepted the policy — otherwise you risk losing your house.

In June 2006, Hansa Mehta’s husband Prakash took a Rs 30 lakh loan from the Kandivli branch of Centurion Bank of Punjab (now merged with HDFC Bank) to buy a flat in Borivli.

The bank insisted on insuring the loan amount, and charged Rs 1 lakh as insurance premium, which it added into the loan.

Banks do sometimes ask for a home loan to be insured,

to protect against the death of the borrower, and add a one-time premium for the insurance policy.

The Mehtas regularly paid their monthly installment of Rs 35,235 till August 2008, when Prakash died. His family requested the bank to settle the balance with Aviva, the insurance company.

“She (Hansa) was told by the bank that the loan amount wasn’t insured — that Aviva had rejected the application for insurance and returned it to the bank in October 2007,” said Hansa’s son Pratik.

“The bank’s recovery agents started visiting our house, and it issued a notice to take symbolic possession of our flat. The visits and notices stopped after we moved court,” he added.

The MHB Colony police station has lodged a first information report against three officers of the erstwhile Centurion Bank of Punjab — Amitabh Sinha, Rajeshree Sood and Rajiv Bhalla — following orders of the Borivli metropolitan magistrate’s court.

“They made it through the loan period despite the death of the family’s earning member because they are financially sound,” said Hansa’s brother Kirit Dhruv.

“But the question remains: who’s going to settle the balance?” he added.

Pratik said the entire episode amounted to harassment of his grieving mother: “It has given us enormous mental stress. Apart from constantly running between the bank’s offices and the court, we’re never sure if we’ll lose the flat. That’s always at the back of your mind.”

Neeraj Jha, head of corporate communications at HDFC Bank, said: “The authorities are investigating the matter and it will not be appropriate on our part to say anything right now.”

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