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Mortgage Insurance: All You Need To Know About Home Protection Scheme

If you are currently repaying your HDB loan with CPF, it is highly likely you have an active Home Protection Scheme (HPS). Essentially, the HPS provides insurance coverage to safeguard against the risk of losing your HDB flat in the event of your demise, which may hinder your family’s ability to continue with the repayment of the home loan.

Let’s delve deeper to gain a more comprehensive understanding of the HPS, what it does, and the alternatives available.

What is the Home Protection Scheme?

The Home Protection Scheme (HPS) is a mortgage-reducing term insurance scheme that protects HDB flat owners. It insures the flat owners until they turn 65, or until the housing loans are paid up.

A claim can be filed when the insured dies, is diagnosed with a terminal illness, or suffers total permanent disability. In the event of a claim, HPS will settle the outstanding housing loan, up to the insured sum, with HDB or the mortgagee directly.

With one of the lowest premiums in the market for mortgage insurance, HPS’ annual premium is deducted automatically from your CPF Ordinary Account (OA). If you have insufficient funds in your OA, family members who co-own the flat with you can also authorise CPF to use their OA savings to pay for the shortfall in your HPS premium.

Who is eligible for HPS?

HPS is a compulsory scheme for those repaying their HDB loans with CPF. If you are paying your HDB flat with cash, you can also choose to opt-in for the scheme. The HPS only covers HDB flat owners and is not eligible for private residential properties, such as executive condominiums, or privatised Housing and Urban Development Company (HUDC) flats.

The eligibility for HPS coverage is also subject to approval. The flat owner/s must be in good health and may be required to undergo a medical examination. A copy of the medical report might also be required before HPS is granted.

Read more: Why You Need Mortgage Insurance To Protect Your Dream Home

HPS for co-owners

For most Singaporeans, your HDB flats are either co-owned with your spouse or family members. If you are covered under the compulsory HPS, the total coverage for all of the owners needs to be at least 100% of the outstanding housing loan.

For example, if you and your spouse are each paying 50% of the HDB flat, you can each be covered for 50% of the loan. If something happens to you, 50% of the loan will be paid for with HPS. However, you can also opt for a different ratio for coverage regardless of how the payment is split, for example, 75% coverage for you and your spouse has the remaining 25% coverage, as long as 100% of the loan is covered.

Another way to ensure peace of mind is to insure all of the co-owners with 100% of the loan amount. For example, if the outstanding loan is S$200,000, you and your co-owners can each be covered for S$200,000. In the event that you or your co-owners die, are diagnosed with a terminal illness, or suffer total permanent disability, the housing loan will still be fully paid for.

Read more: Compare the Best Mortgage Home Loan Rates

How are HPS premiums calculated?

There are four main factors affecting your HPS premiums and they are:

  1. Outstanding loan amount
  2. Loan repayment period
  3. Type of loan (HDB or bank loan)
  4. Age and gender of applicants

A higher loan amount, a shorter loan repayment period, repaying a bank loan, and men applicants tend to result in a higher HPS premium. You can also use CPF’s HPS calculator to get a better gauge of the annual premiums.

HPS claim exclusions

In the event that any of these circumstances arise within the first policy year of HPS coverage, claim benefits will not be deemed payable:

  • Member committed self-inflicted injury or suicide
  • Member committed a criminal offence punishable by death, or
  • The claim arose out of member’s own intentional criminal act

HPS benefits are also not payable if:

  • Member was not in good health before the commencement of HPS cover
  • Member provided false or misleading information, or
  • The claim arose from wars or any warlike operations or participation in any riot

Opting out of HPS

If HPS coverage is mandatory for you, it is still possible to apply to opt out provided that you possess an active insurance policy from any of the following categories:

  • Whole life
  • Term life
  • Endowment
  • Life Riders (must be attached to a basic policy)
  • Mortgage Reducing Term Assurance (MRTA) / Decreasing Term Rider

These policies must provide coverage for your remaining housing loan balance up to the complete loan tenure or until you reach the age of 65, whichever comes first.

Conclusion

Buying a property in Singapore might be the most expensive purchase you’ll ever make. Navigating the various procedures involved in securing your HDB flat can prove to be a daunting experience for first-time homeowners.

Starting off with the basic HPS is certainly advisable, but it may also be worthwhile to explore the possibility of securing a private mortgage insurance plan to complement your existing coverage. If you need more information about a private mortgage insurance policy, feel free to reach out to the Planner Bee team at ask@plannerbee.co.

Read more: Mortgage 101: What is Mortgage Servicing Ratio (MSR) and Total Debt Servicing Ratio (TDSR)?

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