When acquiring one of the many HDBs for sale in Singapore, you may come across something that’s called the Home Protection Scheme (HPS). It is a government initiative that was set up in order to protect home owners. Find out more by reading about it below:
What is the HPS?
The HPS is a mortgage-reducing term insurance that keeps you and your family from losing your flat should you find yourself unable to pay your outstanding home loan due to unforeseen events such as death, terminal illness, or total permanent disability. In the practical sense, it guarantees your flat’s ownership regardless of any changes to your living status.
It covers individuals (under Annual Premium (AP)) up to 65 years of age or until the housing loans are paid up – whichever comes earlier. However, in the event that a member is insured before 1 March 2001, then your Single Premium (SP) HPS will cover you only up to 55 or 60 years old, depending on when you joined the scheme. Incidentally, the board will extend your AP cover when your SP cover has expired with a loan still outstanding.
Application for the HPS depends on where you got your home loan in the first place; online forms are also available here.
Who should get the HPS?
Beginning on 1 November 1981, the CPF (Central Provident Fund or 公积金) has made the HPS compulsory for those who use their CPF funds to pay for their monthly installment repayment (regardless of whether that’s in partial or in full).
If you find that your CPF Ordinary Account (OA) funds are not enough to cover your premium, then you can complete your payment via the following methods:
- E-cashier or E-nets
- AXS/SAM Stations
- Cash at any Singapore Post branch
- Cheque to CPF Board
In addition, if anyone co-owns the flat with you, then you can authorize them to use their CPF OA savings to pay for your remaining balance.
The HPS is not really for those who are able to pay for their flat’s purchase or monthly installments in cash, though they can get it as well should they want to.
Take note that it does not cover any private residential properties, such as executive condominiums (ECs), privatised housing, or any Urban Development Company (HUDC) flats.
If you want to learn more about condos and HDBs, read our article here.
Is the HPS compulsory all the time?
No, because there are other policies (or mortgage insurances) that can cover your outstanding home loans just as well. If you already have them, then you can apply to be exempted from it.
Examples of other insurance policies are:
- Whole Life
- Term Life
- Life Riders (must be attached to a basic policy)
- Mortgage Reducing Term Assurance (MRTA)/Decreasing Term Rider
However, if you’re already HPS covered, then you’re better off keeping it on board and availing of other independent insurance to add to it instead.
Keep in mind though that your HPS may be revoked if your other policies are changed or discontinued.
How much does the HPS cost?
There are 4 main factors which heavily influence how much your premium will be. They are:
- The outstanding home loan amount on your flat
- The higher your loan, the higher the premium.
- The repayment period for your flat
- The shorter the period, the higher the premium. But, you only need to pay your annual premium for 90% of your HPS cover period. For example, if your cover period is 30 years, then you only need to pay for 27 years.
- Your type of loan, either concessionary rate or market rate
- This depends on when you took your loan out. If it was before 1 January 2003, then you might be under the then available HDB Market Interest Rate. Had you taken your loan out any later, then you would be subject to the HDB Concessionary Interest Rate instead.
- The HDB Market Interest Rate vs. the HDB Concessionary Interest Rate: The former’s value was taken from the average loan interest rates offered by 3 local banks. Namely: DBS/POSB, OCBC, and UOB. On the other hand, the latter is calculated by adding 0.1% more to the current CPF interest rate.
- Your age and gender
- The older you are, the higher the premium. Generally, men also pay higher premiums than women do.
Those who want to get a more exact estimate of how much the HPS will cost them can try out this online calculator.