Insurance, Term Life Insurance

What is Home Protection Scheme (HPS) and can you be exempted?

If you are using your CPF savings to pay for your monthly housing loan installments, chances are, you are subscribed to HPS.

What exactly is HPS?

The HPS is a mortgage-reducing insurance that protects members and their families against losing their HDB flat in the event of death, terminal illness, or total permanent disability. (Source: CPFB)

HPS insures members up to age 65 or until the housing loans are paid up, whichever is earlier.​ In the event that the insured is unable to make payment for the housing loans due to reasons covered by the scheme, the CPF Board will pay up the outstanding housing loan or the amount that you are insured for. 

Who can be insured under HPS?

If you are using your CPF to pay for your monthly housing loan installment, you are required to purchase HPS. Whereas HPS is optional if your monthly installment is paid through cash.

Do note that HPS does not cover private residential properties, such as executive condominiums (ECs) or privatised Housing and Urban Development Company (HUDC) flats.

Is it compulsory?

You can actually be exempted from HPS. With the myriad of events happening when applying for HDB, many simply assumed that it is a compulsory scheme!

Contrary to popular belief, you can apply for HPS exemption if you are holding one or more policies that cover your outstanding housing loan. The policy should provide coverage up to the full term of the loan or 65 years old, whichever is earlier, in the event of death, terminal illness, or total permanent disability​.

The following policies are applicable:

  1. Whole Life 
  2. Term Life
  3. Endowments 
  4. Life Riders (attached to a basic policy)
  5. Mortgage Reducing Term Assurance (MRTA) / Decreasing Term Rider

In the case where your insurance policies used for the exemption are altered or discontinued, your exemption from HPS will be revoked.

More details for exemption can be found here.

Should I apply for an exemption from HPS?

The decision to be exempted is strictly dependent on your individual financial circumstances. However, these are some factors that you should consider.

Value 

Despite being a government-led initiative, HPS is not necessarily the cheapest mortgage insurance in the market. Some private providers have mortgage insurance that can be cheaper than HPS. Some private plans also offer the option of premium refund or discount should there be no claims made during the policy term. 

Flexibility

In the event of a payout for HPS, the proceeds will be paid directly to HDB. On the other hand, in the cases of joint MRTA from private insurers, the payout will be in the form of cash. Although they are meant for repayment of the home loan, the beneficiaries have the flexibility to decide how to use it.

Possibility of being over-Insured

Your Mortgage of the house might have been accounted for as a recurring liability in your existing insurance policies. Thus, it might be a case of excessive coverage. It will be wise to check with your financial advisor as the money could be better spent.

What are the other alternatives?

Aside from MRTA from private insurers, other alternatives include term life policies. 

Unlike MRTA, where the sum assured reduces with time, the sum assured for term life policies usually does not decrease over time. Moreover, the premium payable for term life policies can actually end up to be lower than the HPS. 

Additionally, similar to the joint MRTA from private insurers, the payout from Life Policies are usually in the form of a lump sum of cash. This gives you the flexibility to deal with more pressing needs, should there be a need to.

The table below provides a comparison between the HPS and  Term Life Policies:

*Figures are based on Non-Smoking Male (23 years old)

Interested to find out more? Schedule an appointment with us below.

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