All You Need To Know About Home Protection Scheme
HDB (Housing Development Board) flats house up to 80% of Singaporeans. And the best part is that the Government of Singapore provides an affordable housing protection scheme known as HPS . HPS keeps HDB members and their families protected from losing their flats in case a tragedy strikes. What’s more, you pay the premiums using your CPF savings and not cash from your pocket.
We will provide you with the information you need about insuring your home loan using HPS, eligibility for the cover, how to make payments of the HPS premium for your property, exclusions, and everything else you need to know.
What Is Home Protection Scheme (HPS)?
HPS is a mortgage-reducing insurance plan. It is provided by HDB for homeowners who purchase an HDB house and choose to service their loan instalments, either partially or fully, through direct deductions to the ordinary account of their Central Provident Fund (CPF).
It offers protection to HDB flat owners and their families against losing their HDB flat and also covers a house purchased under the Design, Build and Sell Scheme (DBSS). HPS ensures that these households do not lose their home for incapacity to pay their mortgage due to:
- Terminal illness with a diagnosis of less than a year to live
- Total and permanent disability
It is administered by the CPF in Singapore and does not apply to private residences like executive condominiums (ECs). A member who does not pay their home loan from their CPF OA is, however, allowed to take the insurance.
HPS Singapore insures CPF members until they get to age 65 or until their outstanding housing loan is fully paid up, whichever is earlier. For those insured before 1st March 2001, the Single (SP) HPS covers up to age 55 or 60 depending on the date of joining the scheme. The date is indicated in the SP certificate.
In the occurrence of either of the three mentioned events, the CPF Board pays the sum assured, which caters for the mortgage.
Do I Have To Be Insured Under HPS?
HPS is mandatory unless you do not qualify due to pre-existing health conditions. However, you can apply for an exception in situations where you have one of the following private insurance policies:
- A Whole Life Insurance
- A Term Life Insurance
- Endowment plans
- Life Riders attached to a basic policy
- Mortgage Reducing Term Assurance (MRTA) / Decreasing Time Rider
In order to qualify for an exemption from HPS, the insurers must cover you until you turn 65 years old or until the outstanding housing loan is fully paid up, whichever is earlier. It should cover death, a terminal illness, or total permanent disability.
Relying fully on HPS may not be the best choice in one of the following scenarios:
1. You Want A Wider Coverage
HPS does not cover any other conditions except in the event of death, terminal illness, and total and permanent disability. But there are other tragic incidents like critical illnesses that can cause an incapacity to work and pay your housing instalments. In the occurrence of such events, you will need to continue paying your HPS premiums and the mortgage loan remains your responsibility.
You can increase your coverage to include such catastrophic events that could affect your ability to repay your loan by getting one of the private insurance policies that cover it. A mortgage reducing insurance is the best option. You can get a Mortgage Reducing Term Assurance (MRTA) with CI (critical illness) coverage. This way, you have the assurance that your housing loans are paid in spite of your capacity to do so, and your family will not be kicked out. Compared to other policies, MRTA offers more benefits given the size of most home loans.
2. You Want Portability with Your Coverage
HPS coverage is terminated once you dispose of your flat. And for people who plan on buying property after the disposal, it can cause a lot of inconveniences. Getting a new cover for your subsequent homes carries the risk that you might pay more due to advancement of age, or fail to qualify for the coverage if you happen to have a health condition at the point of the reapplication.
An MRTA is portable and getting it provides the assurance that your subsequent properties will still be insured even after disposing of the current property. And that your family will still have a place to stay if a tragedy occurs.
If you prefer private insurance policies, note that you will be paying your premiums in cash and not through funds from your CPF Ordinary Account (OA).
In case of termination or change of the policy from the private insurance covering your mortgage, the exemption from CPF HPS may be revoked. And you will need to make a re application for exemption.
How Much Must I Be Insured for?
The requirement by the CPF board is that the outstanding home loan amount for every household should be insured 100%. If the responsibility of the mortgage amount is shared between two parties or more, the coverage should be spread in at least an equal proportion to the housing instalment each of the home owners pays.
For example, if your share of the monthly repayments is 75% and your co-owner has a share of 25%, your share of HPS cover will be at least 75% or more while the share of your partner or co-owner will be at least 25% or more, which makes the sum assured to be 100%. Each of you can also choose to be insured for 100% of the mortgage so that if something should happen to one of you, the CPF board will fully pay the outstanding loan. As your outstanding mortgage balance reduces over time, the sum assured over the policy period also reduces.
In the instance of shared responsibility, if the ratio of sharing the responsibility changes, you can make an appointment and inform the CPF members of the board to get the HPS premiums adjusted. You should also inform the CPF board if you use a lump sum to pay a larger loan amount than anticipated, and CPF will adjust your premiums.
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How Much Is The HPS Premium?
There is a Home Protection Scheme CPF Premium Calculator in the CPF website that you can use to calculate your premium. But basically, four factors determine the amount of HPS premium you pay.
- Outstanding housing loan
- The loan repayment period
- The type of loan (concessionary or market rate)
- Your age and gender
Premiums are higher for larger loans or those with a longer repayment period while females and young people pay lower premiums.
The CPF home protection scheme only requires you to pay premiums for a percentage of 90% of your cover period. For example, if you need to be covered for fifteen years, you will pay premiums for thirteen and a half years.
The premiums are deducted from your CPF OA yearly. The HPS premium deduction has a higher priority than your loan liability and is deducted first. Failure to pay a single premium can result in the loss of your HPS CPF cover.
If there are insufficient funds in the OA, you can make payment of the difference in cash in any of the Singapore Post branches, write a cheque to the CPF board, or use e-cashier and AXS/SAM stations. For a flat you co-own, your partner or spouse can help you pay by authorizing CPF to deduct your premium from their account.
Note that according to CPF’s terms, a mortgagee loses eligibility to make claims under HPS in any one of these circumstances:
- In the event of total and permanent incapacitation before the commencement of the HPS cover
- In a situation where false and misleading information was provided during the HPS application, such as a false health declaration
- There is no way a claim can be made in the event of suicide or self-inflicted injury within the first year of the cover
- Total and permanent incapacitation or death that results from participation in a riot, wars or something that is in any manner similar to war disqualifies members from making a claim
- Members can also not make claims in the event of committing an offence that results in capital punishment within the first policy year
How To Apply
If you are going to be making an HDB housing loan application, be sure to apply for an HPS cover at the HDB office or any branch office when requesting to use your CPF for your monthly housing loan instalments.
If you are going to be using a bank housing loan, you need to first apply for HPS online before making a request to use your CPF savings to pay your monthly housing loan instalments using the e-service. On ‘my cpf’, go to Online Services and click My Requests. Next, select Home Protection Scheme (HPS) and choose Apply for/Adjust HPS Cover (Ref: HPS/45). If you are not going to be using your CPF ordinary account to pay the monthly housing instalments for your HDB or bank loan, you can still get a mortgage insurance cover under HPS by applying online on ‘my cpf’ using the same procedure.
If you have the option of a private mortgage insurance cover such as Term Life, Whole Life, or Life Riders insurance schemes that qualify you for exemption from HPS, you can make a HPS exemption application through ‘my cpf’ and follow the procedure above. When you get to the Home Protection Scheme (HPS) section, click on Apply to be Exempted from HPS (Ref: HPS/2).
The CPF offers rebates to persons who apply for an exemption. The rebate amount can be in the form of a full premium refund added to your OA if the request is received within a month from the issuance of the HPS cover. In other cases, you get a pro-rated refund where the money is added to your OA upon the lapse of your HPS cover.
In order to get approval for your HPS, The CPF board needs to check your health for serious pre-existing conditions like cancer and organ failure, and others. The CPF board with the help of a panel of doctors assess each HDB flat owner individually and check each applicant’s health risk profile.
Housing loans are expensive, and when you add a mortgage insurance scheme to the equations, it gets worse. HPS is an affordable insurance cover that serves the purpose of protecting homeowners from losing their flat in the event of death, terminal illness, or total permanent disability. You are now armed with all the information you need to get affordable insurance for your flat.
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