Insurance

Life Stage – New Home Owner

Your family. Your new home. You are looking forward to the many great memories to come. Ensuring that your family's home is well protected when the unexpected hits and your family's income capability has declined, is a key financial need at this stage.

  • Fundsupermart
  • |
  • Published on 27 Sep 2016

Life stage=Working Adult

Turning the keys to your new apartment, you start off with some traditional ceremony, be it rolling a golden pineapple, sprinkling of rice grains, etc. The feeling of starting a new home with your loved ones is a feeling hard to forget. At this life stage, protecting your new home in the event of unexpected death, terminal illness or permanent disability, is a key concern. Such incidents will reduce your family’s earning capability, which could be significant if you are the main bread winner.

To prevent such financial disaster from happening, there are mortgage reducing insurance to help to protect your family home.

Home Protection Scheme (HPS)

Home Protection Scheme (HPS) is a mortgage reducing insurance administered by the Central Provident Fund (CPF) board. The board insures CPF members on the outstanding mortgage loan amount on their HDB flat, in the event of death or permanent incapacity before the mortgage loan is fully paid up. This allows their families to continue having a home should any misfortune event befalls on the flat owner.

Home Protection Scheme (HPS) is a mortgage reducing insurance administered by the Central Provident Fund (CPF) board. The board insures CPF members on the outstanding mortgage loan amount on their HDB flat, in the event of death or permanent incapacity before the mortgage loan is fully paid up. This allows their families to continue having a home should any misfortune event befalls on the flat owner.

The percentage of cover for each co-owner is quite flexible, and can be set to 100% each. Which means, that in the event of death of either co-owners, the HDB flat would be considered as fully paid up. At minimum, the total coverage should add up to 100% (e.g. 80% co-owner A and 20% co-owner B).

HPS covers till the age of 65 or the end of the loan period, whichever is earlier. Premium amounts remain the same throughout the premium payment period, which is 90% of the loan term. As such, a 30-year loan tenure, has a premium payment period of 27 years but covers for the full 30 years.

HPS provides the bare essential coverage for most new HDB home owners, but if you are looking at enhancing your mortgage protection, there is the Mortgage Reducing Term Assurance (MRTA).

Mortgage Reducing Term Assurance (MRTA)

Mortgage Reducing Term Assurance (MRTA) on the other hand is mainly used by private property owners, as HPS does not cover private residential properties such as executive condominiums (ECs) or privatized Housing and Urban Development Company (HUDC) flats.

MRTA essentially functions the same way as the HPS, but with the option of having adding supplementary benefits common in most insurance plans. To help understand the differences between HPS and MRTA we have included the comparison table below:

Comparison of MRTA vs HPS:

Home Protection Scheme (HPS)
Mortgage Reducing Term Assurance (MRTA)
Premiums are paid on a yearly basis only.
Flexible premiums payment mode: Monthly, Quarterly, Semi-Annual, Annually.
Premiums can be paid by CPF OA.
Premiums can only be paid by cash.
Coverage commences upon legal home ownership.
Coverage can commence as early as home loan is approved.
Non-transferable where coverage terminates upon sale of property.
A new application is required again when purchasing a new property and premium amount will also take into consideration the applicant’s current age and health condition.
Remaining insurance coverage can be transferred to the mortgage loan of the new property.
Premium amount to be paid may increase in accordance to the new sum assured.
No other coverage benefits.
Supplementary benefit e.g. Critical Illness and Premium Waiver can be added on to the policy.
Upon successful claim, the sum assured will be paid to the loan provider (HDB or Bank) for the outstanding loan amount.
Upon successful claim, the sum assured will be paid to the beneficiary of the policy.
Applicable to HDB (except EC / HUDC) flats.
Applicable for all housing types.

Based on the comparison table above, MRTA has its edge when compared to HPS. Some interesting highlights are the transferable features, add-on benefits, commencement of coverage and the recipient of the payout upon succ ssful claim.

List of MRTA products that are available on Insurance@FSM

Ensuring your family’s home is sufficiently covered is an important part of financial planning. At Insurance@FSM, we are here to walk with you through your life’s journey. If you would like assistance in reviewing your financial and protection needs, please feel free to contact our team of friendly investment advisers at advisory@fundsupermart.com

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