Buying an HDB flat is a great life achievement for many Singaporeans and permanent residents. It is a challenging task that frequently necessitates financial commitments for up to 25 years.
But what happens if the owner(s) encounter tragic circumstances, such as critical injuries or serious illnesses that impair their ability to make loan payments on their apartments? Would they lose their homes or struggle financially to pay the mortgage? Will their family members be forced into mortgage loan repayments?
The Home Protection Scheme (HPS) was established to shield owners of HDB flats against that possibility. Please continue reading to learn how it can help you.
What is a Home Protection Scheme?
The HPS is a mortgage-reducing insurance that protects homebuyers and their family from losing their HDB flats in the event of death, terminal illness, or total permanent disability that can inhibit them from paying the home loan in full.
It is controlled by the Central Provident Fund (CPF) and covers DBSS or HDB apartments only. However, it doesn’t cover private residential properties like executive condominiums, landed properties, or privatised Housing and Urban Development Company (HUDC) flats.
HPS covers the outstanding home loan balance up to the time you pay your house loan in full or until the insured person reaches the age of 65, whichever is earlier. On the hand, private insurance coverage has no maximum age.
Benefits of a Home Protection Scheme
1. Protects You from Losing Your Home
If you pass away, have a terminal disease, or become totally and permanently disabled, you’ll receive the insured sum, which you can use to pay off your housing loan. Your family members won’t have to stress about making timely loan payments on your behalf or losing the apartment, so you can relax.
This is because the three occurrences can significantly affect the ability of your family to pay the remaining sum of the HDB mortgage. The impacted homeowners can file an HPS claim for their mortgage balance, allowing them and their family members to continue staying in the flat as usual.
2. You Pay a Reasonable Premium
All CPF members will be able to afford HPS. You must be protected by HPS insurance if you use your Ordinary Account (OA) savings to make your monthly housing loan payments.
It doesn’t matter whether or not you are using the CPF funds to pay off your home loan; you can still select to be protected by the HPS. When budgeting for your house, employ the HPS Premium Calculator to project the approximate yearly premium for your insurance.
3. The Easy Premium Payment Process
The annual automatic deduction from your CPF for the HPS payment is payable in full out of your CPF OA savings. This is convenient and helpful to guarantee that your insurance won’t lapse.
If your OA does not have enough money to cover the cost of your HPS premium, you will be informed and given the option to pay with cash at any Singapore Post Office branch office or by e-Cashier (using eNETS or PayNow).
Besides, if you co-own the home with your partner, sibling, child, or parent, they can give the CPF board permission to utilize their OA savings to cover the gap in your premium payments.
How Does HPS Work?
HPS ensures that even if your living status changes due to unavoidable circumstances, you will remain the owner of your HDB flat. That implies that if the flat owner passes away, has a terminal diagnosis, or suffers a total and permanent disability, you or your family will be eligible to file an insurance claim. Your mortgage balance will be the amount you are eligible to collect.
If you are a co owner of the flat with your partner or a family member, then how will the home protection scheme function in such a case?
All owners’ total coverage must be 100% of the outstanding house loan for those registered in the mandatory Home Protection Scheme (though it can be more). You can each be insured for 50% of the loan if you and your partner pay the same amount toward your HDB apartment.
For instance, if you and your spouse have a $150,000 outstanding home loan; thus, each of you will get $75,000 as long as your combined HPS coverage totals $150,000 to satisfy the minimum criteria.
However, you might choose a different ratio, such as having $100,000 of coverage for you and $50,000 for her. This can be beneficial if you are not dividing the loan equally.
Additionally, the two of you can be insured for a maximum of 100% each by being kiasu. Thus, you and your partner will get $150,000 in insurance coverage. In this case, the home loan will be fully repaid if one of you passes away. Though, the premiums are hefty.
Eligibility for An HPS Cover
You must be in good health to be eligible for an HPS policy. All information about your health must be declared and completely disclosed.
These include all of your ailments, both past and present; any surgeries, treatments, or examinations that you have had in the past or will have in the future; and any handicap, either mental or physical.
The CPF board will determine if you qualify for HPS protection based on the information you disclose. You might need to undergo a medical examination. Additionally, the CPF board could ask your attending doctor for a copy of the medical report on your health condition.
Is HPS Compulsory?
HPS is compulsory for all HDB owners. If you are paying for your HDB apartment with your CPF, you must be covered by HPS insurance.
If you currently have other insurance policies that guarantee that your mortgage’s share will be paid for in case something unfortunate occurs to you, you can ask to be excused from this requirement. These insurance plans comprise term life, mortgage term assurance, whole life, decreasing term riders, and add-ons to a basic policy.
If the insurance policies you employed to get approval for exemption are terminated or altered, your exclusion from HPS may be cancelled. You must reapply for an HPS exemption if you want it in the future.
The HPS does not require or automatically cover HDB homeowners who have a bank home loan. If such homeowners need HPS coverage, they must submit an application through the CPF website.
There can be a slight coverage gap that homeowners with HPS insurance protection might be oblivious to. You will need to reapply for HPS instead of having your coverage carried over if you ever sell your house and buy another HDB unit. This implies that your eligibility will be evaluated in light of any new medical or health condition you may have acquired.
How Much Are My HPS Premiums?
You can estimate the cost of your premiums using the Home Protection Scheme Premium Calculator on the CPF website. The HPS premium is calculated based on certain factors as per CPF. These are:
- The flat’s loan repayment period
- The flat’s outstanding housing loan
- The member’s gender and age
- Loan type (Bank loan or HDB concessionary loan)
- Percentage of the flat’s coverage
Your HPS premiums will often increase if your loan amount is larger or the repayment period is short. Your premium will go up as you get older. Additionally, men typically pay higher premiums than women do.
Fortunately, only 90% of your cover period requires premium payment. As a result, if you have coverage for 30 years, you will only pay premiums for 27 years.
How Long Is Home Protection Scheme?
When you first become insured through HPS, you will be protected by the Annual Premium Cover up until the earlier of age 65 or when you pay your mortgage loan is full.
If you had insurance before 1 March 2001, you have Single Premium Cover, which will protect you until the age of 55-60 based on when you enroll in the program.
Can I Use CPF to Pay HPS Premiums?
Yes! Your CPF OA will automatically be debited for the annual premium. If you don’t have sufficient funds in your OA to cater for the HPS insurance and house loan, then the HPS insurance will be paid first to prevent your coverage from expiring.
CPF will let you know if your OA still lacks sufficient money to cover the HPS premium. You can ask your co owner to use their CPF savings to cover the cost, or you can make payment using PayNow, eNETs, or AXS.
How Can I Be Exempt from HPS?
If you have additional coverage to pay the outstanding loan until you reach the age of 65, you can apply for an HPS exemption. Some of these insurance policies include:
- Term life
- Whole life
- Life riders
- Decreasing term rider/mortgage reducing term assurance (MRTA)
If you want to opt out of HPS, go to the CPF website and apply online. You only need to log into your CPF account, move to My Requests, Home Protection Scheme, and apply for HPS exemption.
Members will not file claims under HPS if they are not in good health prior to the start of the HPS cover or information given is misleading or inaccurate.
Home Protection Scheme (HPS) vs. HDB Fire Insurance and Home Insurance
As mentioned earlier, a home protection scheme is mortgage-reducing insurance that insures your HDB flat, preventing you from losing it once you are unable to make mortgage payments in the case of death, terminal illness, or total and permanent disability.
The HDB Fire Insurance Scheme, managed by HDB, aids in relieving flat owners of the cost of necessary repairs in case a fire occurs. The HDB fire insurance pays all expenses of restoring damaged interior fittings, built-in sections, and internal structures.
Home Insurance, sometimes referred to as Home Content Insurance or Homeowners Insurance, is a property insurance type that protects households and aids in covering the cost of repairing or replacing private property that is destroyed by various risks, including vandalism, fires, burglaries, and more. Private insurers offer home insurance for sale.
Other Options for Mortgage Insurance
Mortgage insurance is available in different types. Each has its own set of characteristics and requirements. The most common ones include the following:
- Mortgage Reducing Term Assurance (MRTA): This is an insurance policy that protects your home loan in case unforeseen circumstances arise before the home loan is paid in full. MRTA pays the remaining loan balance to relieve your loved ones of debt strain. Companies that offer life insurance give you worry-free enough coverage wherever you are, whenever you need it, and under all conditions.
- Level Term Assurance (LTA): This is a regular premium term insurance plan designed to offer a specified fixed sum assured in the event the life assured dies within the policy term.
Home protection scheme ensures you and your loved ones don’t lose your HDB flat in the event of death, chronic disease, or you become permanently disabled. Its premiums are affordable, and the premium payment process is simple.
- HPS cover begins when you are the flat’s legal owner and have made your first HPS premium.
- HPS can save money if you have life insurance or plan to purchase it. Since HPS already covers your mortgage payments, you can choose a lower sum assured on your life insurance policy, making you pay the lowest premiums.
- You can contact the CPF so that they can adjust your HPS coverage to avoid paying too much or being underinsured.
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