The Home Protection Scheme (HPS) is a form of mortgage insurance that protects homeowners in Singapore. With HPS, individuals can enjoy the peace of mind of knowing that their home and loved ones are safe against financial loss or distress in the event of death or permanent disability.
The HPS contributes to a sense of security and stability in the housing market by alleviating fears of losing homes due to unfortunate circumstances. Over the years, that fostered a robust demand for public housing, with the HDB market remaining vibrant and resilient.
This article will provide a comprehensive breakdown of this scheme, its eligibility criteria, potential benefits and drawbacks, options for HPS exemption, and everything in between. It will help all future HDB owners while purchasing their first unit.
The Home Protection Scheme, or HPS, is mortgage-reducing insurance that protects you and your family from losing your HDB flat if you can’t repay your home loan.
Administered by the CPF (Central Provident Fund) Board, it helps insured homeowners manage their mortgage repayments in an unfortunate event where a co-owner(s) passes away, contracts a terminal illness or becomes totally and permanently disabled.
The scheme fits snugly into Singapore’s extensive social safety net, providing another layer of financial security for HDB homeowners.
HPS provides protection coverage to the insured member until 65 years of age or until you pay off the housing loans, whichever is earlier.
For example, if you are using 50% of your CPF savings to make the monthly loan payments, and your co-owner is paying the other 50%, then the HPS can help cover at least your 50% share in case something serious happens to you. In other words, if you pass away or become seriously ill or disabled before paying off the HDB loan, half the outstanding home loan amount is covered immediately.
It means your co-owner(s) do not have to worry about keeping up with your share of payments and risk losing the flat.
Note that HPS only covers HDB and DBSS flats. It does not cover private condominiums, executive condominiums (ECs) and other types of private property. Consider purchasing private insurance coverage if you have an outstanding housing loan for a private property.
If the mortgage borrower passes away or becomes permanently disabled before 65 years, HPS will pay off the outstanding home loan up to the sum assured and based on the percentage share of the insured.
The outstanding mortgage amount gradually decreases when the CPF Board pays your monthly home loan instalments. It means that the sum assured over the policy period will also decrease. The CPF Board requires 100% of the outstanding home loan to be insured.
It is prudent to spread the HPS coverage based on your share of responsibility in repaying the mortgage. For instance, if you need to manage 60% of the monthly repayments, your HPS should cover at least 60%, and the co-owner should be insured for the remaining 40%.
The total HPS coverage of all owners should be at least 100% of the outstanding loan by default. However, you and your co-owner(s) have the choice to increase the coverage share, allowing each owner to be insured for up to 100% of the loan amount. That means if anything happens to any of the insured co-owner(s), the outstanding home loan will be fully paid for by the HPS.
But remember that a higher share of coverage would mean a higher annual premium. Ensure your CPF has enough funds for premium payments on your policy anniversary month. Consider your future retirement needs when deciding on the share of coverage to apply for.
Since its inception, HPS has evolved to adapt to changing needs and demographics of the society. For instance, changes were made under the scheme to allow unmarried or divorced individuals to cover their parents, reflecting shifts in household structures.
To qualify for HPS coverage in Singapore, you need to meet the following eligibility criteria:
Don’t forget to make your health declaration for the HPS eligibility assessment. Your eligibility for HPS coverage is subject to approval and health condition at the time of application.
The CPF board may require you to undergo a medical examination and submit a copy of the medical report. You must declare your past and current illnesses, any past surgery/treatment, or physical/mental impairment. Any false or misleading information under HPS cover may lead to cancellation at any time or when you make the insurance claim. Note that any premiums paid are not refundable.
Applicants with serious pre-existing conditions (like cancer, kidney failure, diabetes with complications, etc.) may not be eligible for HPS coverage. But they can still use their CPF monies for their monthly home loan repayments. Such applicants can opt to enrol into HPS with private insurers.
One of the most common questions for people looking to buy HDB flats is: “Do I have to be insured under HPS?” The HPS is is mandatory for eligible buyers and owners of HDB flats who use or plan to use their CPF funds to make monthly home loan payments. In fact, they are signed up for the HPS automatically.
But if you buy an HDB flat without using your CPF savings (i.e., by using cash), you do not need to be covered under this HPS. However, if you want to, you can still choose to be covered under this scheme. You can either apply manually for the HPS or look for a mortgage insurance policy provider.
We always recommend individuals consider having the HPS or one of the alternatives, which we will discuss in one of the sections below.
You can check your HPS cover using the following steps:
Gather your Singpass information since you will need it to log into the CPF Home ownership dashboard. Click on the “Protection against losing your home” option.
After entering the “Protection against losing your home” section, you can view your Home Protection Scheme (HPS) coverage status, current sum assured, the HPS certificate you received when your cover was issued or adjusted, and the share of your Annual Premium HPS cover.
If you don’t see the “Protection against losing your home” section in the dashboard, it shows you are currently not insured under HPS. In such cases, you can apply for HPS coverage for your outstanding housing loan online using your Singpass.
The calculation of your HPS annual premiums may vary based on several factors:
If you have a larger outstanding home loan or longer loan tenure, your HPS premium will generally be higher.
If there are any changes in your share of loan repayment, or if you decide to make a lump sum repayment of your HDB loan to reduce the home loan amount, you must inform the CPF Board to get the HPS premiums adjusted.
Members can use the HPS Premium Calculator on the CPF website to get an estimate of annual premiums. You can use the CPF online services to nominate beneficiaries or make changes to the HPS cover.
The HPS annual premium is deducted automatically from your CPF OA. All premiums can be fully paid using your CPF savings. You will be notified if there is an insufficient balance in your CPF OA for the premium payment. You can pay in cash through e-Cashier using PayNow or in cash at any Singapore Post Office branch.
Another option is to inform the CPF board to use the OA savings of your spouse, parent, child, or sibling who co-owns the flat with you to cover the premium shortfall.
You only need to pay a premium for 90% of your coverage period. For example, if you are covered for 20 years, you only need to pay premiums for 18 years.
Once your HPS application is approved and your first HPS premium deducted, you will receive an HPS certificate. It mentions details like your share of coverage, the sum assured, policy start and end dates, the annual premium rate, and the address of your flat.
The Home Protection Scheme provides several benefits to Singaporeans who participate in the scheme. Here are some of the key benefits of the HPS:
In the event of death, terminal illness or total permanent disability, HPS will settle the outstanding home loan up to the sum assured with HDB or the mortgage provider directly. Your loved ones will not have to worry about keeping up with your share of the mortgage repayments and risk losing the flat.
HPS offers flexibility in coverage by allowing participants to choose the coverage period that matches the repayment period of their housing loan. The coverage period can range from 5 years up to the insured person’s age of 65 or the loan repayment period, whichever is earlier.
The automatic deduction of premium payments from your CPF OA savings ensures convenience and prevents any gaps in your coverage., In case of insufficient funds in OA, you can supplement the payment with cash, or a co-owner can authorise the deduction of premiums from his/her CPF accounts.
The annual premiums for the HPS policy are one of the lowest on the market, which you can pay using CPF savings. The premium rates are age-based, meaning younger participants pay lower premiums than older individuals. The premium amount also depends on the insured amount and the loan repayment period.
While the HPS provides valuable coverage for homeowners, there are some potential downsides and risks to consider:
HPS only covers HDB flat owners, so if you own private property or a different type of housing, it may not apply to you.
If a homeowner has a critical illness but is not totally or permanently incapacitated, they won’t be eligible for an HPS claim.
The HPS only covers you until you are 65 years, which could be an issue for those with longer loan tenures. HPS is solely meant for covering mortgage loans and can’t provide a cover term of more than 30 years.
HPS is not the only option for mortgage insurance. You can choose from several other alternatives (or mortgage insurance) to cover your outstanding home loans.
If you want to be exempted from HPS, you can apply for HPS exemption if you have one of the insurance policies discussed below to replace it:
Essentially, these policies should cover your outstanding housing loan up to the full loan term or until you turn 65, whichever is earlier.
Only once you obtain legal ownership of your HDB flat and your housing loan is disbursed, you may then apply for HPS exemption. If you have refinanced your home loan, you may apply for an HPS exemption after the refinancing is complete and the bank has disbursed the housing loan.
To obtain an exemption from the HPS, you can submit an online application through the CPF website. Access your CPF account, navigate to My Requests, then select Home Protection Scheme (HPS), and choose the option to apply for exemption from HPS.
Note that your HPS cover also ends under some conditions, such as when you sell your HDB flat, fully redeem your housing loan, or have a new HPS insurance cover issued for your new HDB flat.
When considering different mortgage insurance plans, you should carefully consider the pros and cons of each to make an informed decision about which insurance option works best for you.
While opting out of HPS is an option, it works as your safety net with automatic premium payments using your CPF savings. Note that you might be paying more than you should if you have taken up private mortgage insurance. Another good thing about HPS is that it is more cost-effective with affordable premiums than those private mortgage insurance plans.
HPS lacks portability, so you must terminate your HPS coverage when you dispose of your old property and re-apply for HPS for your new property. Moreover, HPS does not have the option of extending the coverage to other conditions like critical illness.
Overall, the HPS has generally been well-received by the public, with many viewing it as an essential protection plan. Stories abound of families who have benefited from the scheme, emphasising its crucial role in mitigating the impact of adverse life events.
Compared to similar programs in other countries, the HPS stands out for its comprehensiveness and integration with the broader social welfare system. In countries like the United States, for example, private mortgage insurance typically only protects the lender, not the borrower.
On the other hand, the HDB Home Protection Scheme is designed with the homeowner’s welfare in mind. Looking forward, we expect the HPS to continue playing a crucial role in Singapore’s social protection system.
At Dollarback Mortgage, we help homeowners make the right financial decisions based on their circumstances and find the best home loan to achieve their financial goals. Our team of mortgage consultants can help you uncover new ways to save time and money – all this on a free, non-obligatory assessment call.
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