What is HPS?
You have been hearing from your friends, colleagues, family and relatives that you need to buy this HPS when you buy a HDB flat from the resale market or direct from HDB.
so what is HPS exactly?
HPS is a Mortgage Reducing Term Assurance (MRTA) which HDB called it Home Protection Scheme. This is a plain vanilla insurance from CPF Board which covers only death and total permanent disability, it does not come with riders(options) to cover critical illness or hospitalization etc. Mortgage Reducing would means the insurance coverage would be reduced year on year in line with the loan amount you owe as you pay down the loan. This is the cheapest type of term insurance you can get in the market.
This affordable insurance is designed to protect your love ones from carrying on the burden of paying the loan in the event of premature death or disability. The good thing is you can use CPF funds or cash to pay for it annually.
so is this compulsory?
It is compulsory to purchase HPS insurance only if you are using CPF funds to service the housing loan instalments from HDB or banks. It is not compulsory to purchase this insurance if you use CPF funds for the initial downpayment and uses cash monies to service the housing loan. Say if you took a 25 year loan from HDB/bank and you cleared the loan in year 10, you can request to cancel the HPS insurance. You can only stop purchasing this insurance if you
- Sold the house
- Cleared the housing loan
- Stop using CPF monies to pay for monthly instalments
Question: I have a million dollars coverage with a Singapore insurer, can i don’t buy HPS?
You would still need to purchase HPS first, and send a request to CPF to waive HPS requirement. You would need to provide details of the insurance policies you have, and CPF Board will access if this insurance is sufficient to cover you till the end of the loan tenure. If CPF approves your request, HPS will be cancelled and balance premiums refunded back to you.
The coverage that your existing policies minimally need is :
- your loan amount + 10%, if you have a 300k loan, your insurance coverage must be at least 330k
- insurance coverage period + 1 year, if you took up a 25 years loan, your insurance policy must have at least 26 years coverage.
Question: Can i buy mortgage insurance from my insurance agent or any other insurer?
Yes you can! You would still need to purchase HPS first, and send a request to CPF to waive HPS requirement. The new policy you are getting must also meet the above mentioned minimum requirements
If you like to know how much HPS will cost you, here is the link
My advice would be to get a mortgage insurance to cover 100% of your loan obligations even if you are not using CPF funds to pay for the monthly instalment. I for sure would not want my spouse to carry on paying the loan upon my demise. If you would like to talk to financial advisers, do drop an email to firstname.lastname@example.org, we will arrange a licensed and qualified financial adviser to address your concerns :). There is no obligations talking to them.