In Singapore, where most of us are living in HDB flats, with monthly loan payments are made using CPF monies either fully or partially, the Home Protection Scheme (HPS) by CPF Board is made compulsory in this whole equation. Purchasing a house can be a major decision; considering having a shelter being an essential need and the expenses involved. So let’s look at ways that we can protect our humble abode
Home Protection Scheme
The Home Protection Scheme (HPS) is essentially a Decreasing Term insurance administered by the CPF Board. It provides coverage on the outstanding mortgage loan amount on a HDB flat, in the event of death or permanent incapacity of the CPF member. This assures the families to continue having a home when such misfortune befalls the flat owner.
The word “Decreasing” here refers to the sum assured, not the premiums to be paid. As the monthly mortgage loan instalments are paid, the mortgage loan’s outstanding amount gradually reduces, hence so will the sum assured over the coverage period. Nevertheless, the total HPS cover has to be 100% of the outstanding loan amount for each household.
On the other hand, the premium amount remains the same throughout the premium payment period, which is 90% of the loan term. This means that for a 30-year loan tenure, the coverage period of the HPS is also for 30 years. The premium payment period is for 27 years only. The annual premiums for the HPS are automatically deducted from the owners’ CPF Ordinary Account on a yearly basis.
Exemption from HPS
An exemption from HPS can be applied for when the HDB owner has the following insurance policies:
- Whole Life
- Term Life
- Life Riders (must be attached to a basic policy)
- Mortgage Reducing Term Assurance (MRTA) / Decreasing Term Rider
As long as any of the above insurance product provides coverage over the outstanding loan amount and up to the full loan term in the unfortunate event of death or permanent disability, the owner can apply to the CPF board for an exemption from HPS. To avoid over-insuring oneself, it is advisable for HDB home owners to examine their existing insurance policies and see if exemption from HPS is possible.
In our upcoming article, we will explore the cost and benefits of Mortgage Reducing Term Assurance (MRTA) as a mortgage protection instrument for both HDB and private housing. Stay tuned. More information available on HPS at : www.cpf.gov.sg/Members/Schemes/schemes/housing/home-protection-scheme
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