Learned Mr. Vasudevan has given valuable advice. Kindly follow it.
You have posted:
-"State Bank of India deducted Rs.3000/- from my account as insurance premium for my housing loan, without my consent ."
The bank must have obtained your consent as a fine line in the loan application, loan agreement, annexure etc.
Bank is under obligation and you are within your rights to obtain the certified copy of all forms, documents signed by you for availing the loan. You may check with concerned BM of the loan branch and obtain the certified copies first and examine them.
-"So I have the right to know about the policy. Perhaps I could take some better insurance options."
You seem to have a genuine point here. It is your good money being spent hence you have the right to choose a term insurance policy which you like ( as per terms and conditions of the policy) and the premium may be lower or higher than Rs.3000/-
It may be part of the loan agreement/ or terms and conditions accepted by you that a term insurance policy has to be purchased by borrower and to be assigned in the favor of the bank .
The assignment is possible in case of direct blood relation e.g. spouse, parent, children without any explanation and in case of financial consideration and financial pronote is to be enclosed. The assignment is to be approved by the insurance company and some cost may be involved e.g. stamp paper (it may be Rs.3000/ however the same is to be confirmed from insurance company), assignment fee if any, typing charge, attestation charge etc. Thus this cost may be divided in year’s term of the loan.
Majority of the insurance companies’ prefer to provide model language for assignment. The assignment overrules nomination. The bank shall be entitled to receive the sum assured from insurance company in case of unfortunate event of death of borrower and deduct their dues and refund the balance amount to the legal heirs of the borrower.
The premium of the insurance policy may differ from company to company as per their mortality table. At one point of time the premium of Royal Sundaram was considered to be the lowest.
It is unwritten policy of the lending bank to avail insurance policy from insurance arm/associate of the bank and get it assigned in favor of the bank, to protect the interest of the bank.
In case of the unfortunate event of death of borrower the interest of surety is also protected. However banks are known to proceed to recover from surety and maintain a stand that if and when insurance company disburses the claim in favor of the bank the bank shall discharge the monies recovered. This may also be expressed in the loan papers. The insurance policy copy, and proposal form filled by customer should also be made available to you and you should study it carefully. In case of unfortunate event of the death the nominee/assignee has to lodge claim with the insurance company (with in a specified period as in policy) and insurance company has to revert in a month’s time, if the insurance company chooses to conduct investigation. The time granted for investigation was 6 months.
You were in requirement of the loan and bank has granted you the loan. The terms and conditions of the loan should be assessed from each institution in the market and best choice be made. Insurance has a long term benefit. Kindly study your loan documents and be aware of the nuisance of the terms and conditions and appraise you family and surety.
