Tata AIG Life chief distribution officer Joydeep Roy (left) with Allahabad Bank executive director J.P. Dua in Calcutta on Wednesday. Picture by Kishor Roy Chowdhury

Calcutta, July 2: Existing and new home loan borrowers of city-based Allahabad Bank will now get to choose from two life insurance companies while buying a mortgage term assurance cover. A mortgage term assurance covers the life risk of a borrower to the extent of the tenure and amount of loan taken.

The public sector bank, which already sells Life Insurance Corporation’s (LIC) products under a bancassurance tieup, today signed an agreement with Tata AIG Life Insurance Company for Tata AIG’s insurance policies for home loans.

Under existing regulations, a bank cannot enter into a bancassurance tieup with more than one life insurer. However, in the case of a single product line, it can sell products of more than one life insurance companies.

“We are talking to Kotak Mahindra Life Insurance Company for a group loan cover product for borrowers of education loans,” said Aswini Kumar, general manager (retail) of Allahabad Bank.

A loan cover gives more financial security to the family of a borrower — if the borrower dies during the tenure of the loan, the insurance company repays the outstanding to the bank.

Tata AIG Life’s chief distribution officer Joydeep Roy said the home loan customers of Allahabad Bank would be offered reducing term life insurance designed to cover the mortgage loan obligation against death during the initial loan tenure contracted for.

“In the case of death of a borrower, the insurance company will repay the housing loan and the family of the borrower will get back the property without any claim by the bank on it,” he said.

Allahabad Bank executive director J.P. Dua said 31 per cent of its home loan borrowers had already opted for such a mortgage term assurance policy from the LIC. Dua also said the bank management had sent the rights issue proposal, already approved by its board of directors, to the government for approval.