This article discusses the new LIC Digi Credit Plan (UIN: 512N358V01) policy and how it can be used as loan insurance for your home loan.

📚 Topics covered:

• What is the LIC Digi Credit Plan plan?
• What are the key features of LIC Digi Credit Plan?
• What is loan insurance and why do you need it for your home loan?
• Should you take a reducing plan product like LIC Digi Credit Plan for your home loan?

What is the LIC Digi Credit Plan plan?

LIC Digi Credit Plan (UIN: 512N358V01) is a term insurance plan launched by the Life Insurance Corporation (LIC) of India on 5th August, 2024.

This product is a pure risk term insurance product with a reducing cover meant to act as loan insurance cover for loans like home or vehicle loans.

This policy will pay out the remaining part of the loan in case you die, ensuring your family home (in case of loan insurance for a home loan) will not be repossessed by the bank due to non-payment of EMIs. As the loan balance reduces over time with EMI payments, the cover of this policy will also reduce over time.

What are the key features of LIC Digi Credit Plan?

Criteria	Details
Minimum Age at Entry	18 years (Last Birthday)
Maximum Age at Entry	45 years (Last Birthday)
Minimum Age at Maturity	23 years (Last Birthday)
Maximum Age at Maturity	75 years (Last Birthday)
Minimum Basic Sum Assured	₹ 50 lakhs
Maximum Basic Sum Assured	₹ 5 crores
Purchase Mode	Online Only from LIC website

The reducing cover policy like LIC Digi Credit Plan will be cheaper (in terms of premium) compared to a level-cover term policy whose coverage amount stays constant over the coverage period.

An offline version of this plan, sold by LIC agents, is available as LIC Yuva Credit Life (UIN: 512N357V01).

What is loan insurance and why do you need it for your home loan?

To explain the concept of loan insurance, we will take the example of a home loan. A home loan carries several risks starting from the moment you borrow money:

• What happens if you lose your job or become too ill to work?
• What if your house is destroyed by fire or damaged in an earthquake?
• What if you die and there isn’t enough money to cover the home loan?
• What if interest rates rise and you can’t afford the monthly payments?
• What if having a monthly home loan payment stops you from taking career risks like changing jobs or joining a startup?

To mitigate some of these risks, there are insurance policies:

• Property Insurance: Covers damage to your house from events like fire or earthquakes.
• Loan Insurance: Covers your loan payments if you die.

A policy like LIC Digi Credit Plan can act as the loan insurance product.

To understand if you need loan insurance or not:

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We have covered this topic of loan insurance in detail here: Understanding Insurance Requirements for Home Loans in India: What’s Mandatory and What’s Optional?

Should you take a reducing plan product like LIC Digi Credit Plan for your home loan?

Just because a reducing benefit term-insurance product targeting loan insurance customers exists, does it mean that you should go ahead and buy it? Instead, if you are taking a home loan, it more importantly means that this is a good time to review your entire term insurance cover requirement. We have discussed earlier, like via your annual portfolio review, you need to check if your existing term insurance cover is suitable for your assets (your shares, mutual funds, PF, etc.), goals (retirement, children’s education, etc.) and loans (like this home loan).

We have a term-insurance calculator here that will help you do this calculation: How to calculate term insurance coverage amount?. If you feel, after using this calculator, that a reducing cover term-plan is suitable, then you can consider such plans. Otherwise, you should skip a policy like this.