After securing your first HDB flat, you will immediately realize that you will have to take up the Home Protection Scheme (HPS). When you are a first-time buyer, you might be a little overwhelmed.
The HPS is an insurance protection scheme that will ensure that your family does not lose the HDB flat when you die, and they cannot pay off the outstanding housing loan. However, your finances have to be adequately planned to take up the insurance.
So is HPS the best option for your HDB flat? What are the perks of having one? What are the limitations? Read on to learn more.
What is HPS?
The Home Protection Scheme (HPS) is a mortgage-reducing term insurance administered by the CPFB (Central Provident Fund Board).
It is designed to protect HDB owners from undesirable events that might lead to them not being able to repay their housing loans.
Your family will qualify for a claim if you die, if you are diagnosed with a terminal illness, or if you are permanently disabled. The HPS claims amount is the remaining sum of the HBD home loan. Read more on the complete guide to HDB Grant for First Timer Applicants.
This means that if you die and still owe S$50,000 in a housing loan, it will be fully paid by the HPS. Your family will not have to worry about the loan repayment when you are not there anymore.
HPS is similar to mortgage insurances that some insurance companies sell. If you buy an HDB flat with HPS coverage, you will not need to buy a separate insurance cover. Keep in mind that the HPS is much cheaper than other private mortgage insurance covers.
What Are the Benefits of HPS?
Here are the benefits of getting the CPF’s Home Protection Scheme (HPS):
1. Protection from Losing Your Flat
If anything happens to you, you are assured that the claim will take care of your home loans. Your family will have peace of mind since they will not worry about losing the house. They will not need to keep up with repaying the housing loan.
The scheme offers protection until the age of 65 or until you fully pay HPS premiums for your housing loan.
2. Ease of Making Annual Premium Payments
The HPS premiums are fully payable with OA savings and automatically deducted annually from your CPF. This offers convenience and ensures that there will be no lapses with your coverage.
If you have insufficient funds to pay your premiums in your OA, you will get notifications to make payments through an e-cashier using PayNow or eNETS. You can also pay at any Post Office around the country.
Alternatively, the co-owner can also authorize the CPF Board to use their OA savings to pay your premium shortfalls.
3. Affordable Premiums
The scheme is designed for all CPF members. If you use the Ordinary Account (OA) savings for your monthly mortgage repayments, you must be insured under the HPS.
Even when you use other ways to service your HDB loan, you can still opt for the HPS. If you want to compare its premiums with additional insurance, you can use the HPS Premium Calculator.
Who is Eligible Under HPS?
HPS is a compulsory scheme for any HDB owner using the CPF to pay for their monthly housing installments for their home loans. HBD flats exclude privatized HUDC flats, executive condominiums, or Urban Development Company flats.
However, if you buy an HDB flat but are not using CPF to repay your housing loan, you can still take the Home Protection Scheme. It is not compulsory. HPS covers homeowners up to the age of 65 or up to the point when the loan is paid in full.
It would be best if you satisfied the following conditions to qualify for HPS coverage:
- Have paid the first HPS annual premium
- You are the legal owner of the flat
- Have you completed the loan application with HBD or approved mortgage, or are you legally responsible for the loan?
- Have made a health declaration that is accepted for HPS
- You are between the ages of 21 and 65
If you have enough insurance coverage to cover the outstanding housing loan up to the age of 65 or earlier, you can always apply to be exempted from the Home Protection Scheme.
Here are some of the insurance policies that are accepted:
- Term life
- Whole life
- Life Riders that must be attached to a basic policy
- Decreasing Term Rider/ Mortgage Reducing Term Assurance (MRTA)
Keep in mind that group policies with loans attached, policies from insurance companies not registered in Singapore, policies with loans attached, or procedures in foreign currencies are not accepted.
Even if you have these policies in place, you must first get the HPS cover if you plan to use your CPF ordinary account savings to pay for your outstanding home loan. Only then can you apply to be exempted from the HPS.
Some reasons why some people opt from HPS include:
- Not finding value for money with HPS based on their HPS premium calculations and mortgage amount.
- Having an existing insurance coverage.
- If they are planning to sell their HDB flat after 5-year minimum occupancy period.
- If they are planning to sell their HDB flat to upgrade. HPS does not cover private residential properties.
- When they want to get private MRTA for added critical illness coverage.
In summary, HPS is compulsory for most HBD homeowners. Application for the exemption comes later, and even then, approval is on a case-by-case basis.
When Do You Need to Reapply for Exemption?
1. When Refinancing Your Loan
If you decide to refinance your housing plan, you must reapply for the HPS exemption. This will ensure that your existing insurance policies are still sufficient to cover your financed loan.
Even when there are no changes to your housing loan amounts, your existing insurance policies may not cover you adequately with the higher mortgage interest rates. You will therefore need to reassess the adequacy of your insurance policy.
2. When There Are Changes to Your Insurance Policies
Your exemption from HPS might be canceled if any of the insurance policies are altered or discontinued. The HPS issues will be based on the declared percentage exempted based on your health condition.
How Does HPS (Home Protection Scheme) Work and What Does It Cover?
Several factors are considered when calculating the total annual HPS premiums for HBD homeowners. They include:
- Your home loan tenure
- Your home loan amount
- Loan interest type
- The percentage of coverage
- Age and Gender
If you decide to split the mortgage repayments between yourself and your co-owner, you may get the respective HPS coverage share.
You do not need to use cash to pay for your home loan unless your OA account is insufficient.
Remember that if your HPS lapses, you will need to reapply for HPS and be subjected to another health eligibility check. You can, however, submit a deferment request if you are not in a position to pay; in this case, you will not have to reapply.
Home Protection Scheme Rebates
HPS offers rebates to HBD homeowners. The most recent HPS rebates were paid out-ins January 202. A total of S$640 million was distributed among 760,000 CPF members.
According to the CPF board, about half of the eligible members received S$500, credited to their CPF savings account.
What Does the HDB Home Protection Scheme (HPS) Cover?
If you have insured your home with HPS and paid your annual premiums on time, you will be covered till the age of 65 or until you fully settle your home loan.
Here are instances that show when a person can be covered or not.
|Occurrence||Is it covered under HPS?|
|Terminal illness||Yes. Unless the insured was not in good health before the commencement of HPS cover.
The terminal illness must be certified by an accredited doctor.
|Total permanent disability||Yes.
Unless it is a self-inflicted injury* or the claim arose from wars or any warlike operations or participation in any riot.
The total permanent disability must be certified by an accredited doctor
Unless the claim arose from wars or any warlike operations or participation in any riot, it was a criminal offense punishable by death* or suicide*
Few criteria have to be fulfilled for the claim benefits to be received:
Permanent Disability- In this case, the insured is unable to take part in employment or has a permanent loss of physical function i.e.
- Two limbs
- Both eyes
- One eye, one limb
Terminal illness refers to any disease that is likely to result in the insured person’s death in 12 months.
The HPS does not insure people with critical illnesses such as cancer since the disease would significantly affect the person’s ability to repay the loan.
This is a worrying factor since research shows that one in every five people in Singapore is likely to develop cancer in their lifetime. Another worrying fact is that more than 80% of Singaporeans have critical illness protection. However, with the COVID 19 pandemic, the uptake of life insurance has increased.
The HPS benefits are also not payable if the insured has provided false or misleading information during the application process.
Keep in mind that your HPS will be affected if you:
- Buy a new HDB flat
- Sell your HDB flat
- Redeem your home loan
You will also find private mortgage reducing term assurance almost the same as HPS. Some private mortgage-reducing insurance plans may also include critical illness coverages. In some cases, this helps reduce the financial gaps related to your mortgage if your existing essential illness coverage from insurance plans is insufficient for your home loan.
Frequently Asked Questions
What Is HPS Singapore?
HPS is an acronym for Home Protection Scheme. It is mortgage-reducing insurance that protects its members and families from losing their HDB flat in the event of death, terminal illness, or total and permanent disability.
What Are the Limitations of HPS?
Like most national policies that cater to the masses, they have limitations. Here are the limits of HPS:
1. It Does Not Include Other Coverage
HPS only covers terminal illness, death, and permanent disability. It does not cover critical diseases such as cancer which have a higher probability of occurring.
2. Cannot Have a Higher Coverage
HPS covers 100% of the loan and not more.
3. Cannot Cover a Term for More Than 30 Years
Thirty years is the max the HPS can cover. The HPS cover is meant to cover your mortgage loan solely. So if you are thinking of protecting your income until your retirement age, it is not possible.
4. The Coverage Decreases Overtime
MRTA reduces overtime. The more you pay off the loan, your liability reduces.
5. Premiums Do Not Change Over the Years
While the coverage decreases, your HPS premiums do not decrease. This means that you pay the same annual premiums for reducing coverage.
Which Is Better? HPS Vs. Life Insurance
We have mentioned earlier that you can opt out of HPS if you have life insurance. However, these are very different types of policies. The coverage structure is very different. HPS is tied around an outstanding loan, so the total assured decreases as you make the loan repayments.
On the other hand, life insurance does not decrease the more you make your payments. This means that at one point, you will be under or overvalued.
Both HPS cover and Life insurance can cover your home loan, but life insurance involves more work when calculating your protection needs and ensuring that all the factors are covered.
Is HPS Compulsory?
It is compulsory if you are using your CPF savings to pay off your HBD loan.
How Do I Check My HPS Status?
You will need to go online and check through the CPF website services under “My Messages” to access the information on your HPS certificate.
What Happens If HPS Is Rejected?
If you are rejected from HPS, you will need to get another cover from private insurance policies. You will be better positioned to decide after speaking to a qualified professional to get an alternative route.
Is HPS Automatic?
HPS premiums are automatically paid from your CPF savings ordinary Account and are automatically deducted every year.
If HPS is compulsory for you, you cannot do much. If you can opt out of the scheme, it’s good for you. However, we recommend that you hold on to it if your private insurance coverage lapses when you fail to pay it due to financial difficulties. HPS is paid through the CPF OA account and is quite forgiving even when you are late on your premiums.
- Home Protection Scheme (HPS) is a mortgage reducing term insurance administered by the Central Provident Fund Board (CPFB).
- HPS is compulsory for HBD owners paying for their mortgage through their CPF-OA account.
- You will have to disclose any information regarding your health, and you may be asked for a medical examination.
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