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Mortgage Protection Made Simple: Home Protection Scheme (HPS) vs. Private Term Insurance

For most Singaporeans, purchasing a home is one of the most significant financial commitments they will make in their lifetime. Protecting your home and ensuring your loved ones are not burdened with mortgage payments in unforeseen circumstances is crucial. This is where mortgage insurance comes in.

If you are using CPF savings to finance your HDB flat, enrolment in the Home Protection Scheme (HPS) is mandatory. However, you may apply for an exemption if you have private insurance coverage that is sufficient to cover your outstanding housing loan for its full term or until you turn 65, whichever comes first.

Understanding the differences between HPS and private insurance will help you make an informed decision that best aligns with your financial and protection needs.

 

What is HPS?

HPS is a mortgage-reducing insurance scheme that ensures the outstanding home loan is covered in the event of death, terminal illness, or total permanent disability. This prevents financial distress for your co-owners or family members, ensuring they can continue living in the home without worrying about mortgage repayments.

Key Benefits of HPS

  • Convenient premium payment – Premiums are automatically deducted from your CPF Ordinary Account (OA).
  • Affordable premiums.

Mortgage Protection Made Simple: Home Protection Scheme (HPS) vs. Private Term Insurance — Engage

Above based on Home Protection Scheme premium calculator for Male, age 30.

 

Mortgage Protection Made Simple: Home Protection Scheme (HPS) vs. Private Term Insurance — Engage

Above based on Home Protection Scheme premium calculator for Female, age 30.

 

Potential Limitations of HPS

  • Coverage reduces over time – The sum assured decreases in line with your outstanding mortgage balance.
  • Terminates upon property change – If you purchase a new property (e.g., private residential properties, executive condominium (ECs), or privatised Housing and Urban Development Company (HUDC) flats), your HPS coverage will be discontinued.

 

Private Term Insurance: An Alternative to HPS

While HPS is a simple and effective way to protect your home, a private term insurance policy offers additional flexibility and benefits that may be worth considering.

Key Benefits of Private Term Insurance

  • Fixed Coverage Amount – Unlike HPS, where coverage decreases over time, a private term insurance policy provides a fixed sum assured throughout the policy term. This means that after repaying the loan, your beneficiaries will receive any remaining payout (See Fig. 1).
  • Portability Across Properties – A private term insurance policy remains active even if you switch properties. This is ideal if you are planning to upgrade from an HDB flat to a private property.
  • Comparable Premiums – Many private term insurance policies offer competitive premiums compared to HPS, making them a cost-effective alternative.

Mortgage Protection Made Simple: Home Protection Scheme (HPS) vs. Private Term Insurance — Engage

Fig. 1: How fixed coverage amount can add value to your beneficiaries. 

 

Mortgage Protection Made Simple: Home Protection Scheme (HPS) vs. Private Term Insurance — Engage

Above comparison for Male, age 30, non-smoker.

Mortgage Protection Made Simple: Home Protection Scheme (HPS) vs. Private Term Insurance — Engage

Above comparison for Female, age 30, non-smoker.

 

Get Professional Advice

Ensuring your home and loved ones are financially protected is a crucial part of financial planning. While HPS provides a basic level of mortgage protection, a private term insurance policy may offer greater flexibility and long-term value.

Not sure which option suits you best? Reach out today for a consultation and take control of your financial future!

Important: The information and opinions in this article are for general information purposes only. They should not be relied on as professional financial advice. Readers should seek independent financial advice that is customised to their specific financial objectives, situations & needs. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.

Published By:

Tan Ri'an 陈日安

Meet Ri’an, an esteemed independent financial adviser representative with a decade-long experience in financial and estate planning. His steadfast commitment to prioritising his clients’ well-being and consistently acting in their best interests, sets him apart from the rest. The inherent values of partnership and accountability are firmly rooted in Ri’an’s practice.

Ri’an’s approach is all about understanding each client’s unique aspirations and circumstances before guiding them step by step with a personalised action plan that lead to achieving their financial goals. He is able to simplify difficult-to-understand processes, or policies and highlight the essentials, thus empowering clients to make well-informed choices and be at ease with every decision.

Approachable and enthusiastic, Ri’an finds joy in providing assistance. If you’re ready to work with a financial planning professional who not only understands your financial goals but actively works to achieve them, connect with Ri’an today.

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In compliance with the Personal Data Protection Act, Financial Alliance Pte Ltd (“FAPL”) seek your consent to collect and use your personal data (e.g. name, NRIC, contact numbers, mailing addresses, email addresses and photograph) for the purposes of and in accordance with FAPL’s Data Protection Policy, which can be found on FAPL’s website at https://fa.com.sg/data-protection-policy/.

根据《个人数据保护法》，鑫盟理财私人有限公司征求您的同意向您收集并使用您的个人信息。鑫盟理财将根据公司的个人数据保护政策所阐述的用途使用您的个人资料（例如姓名，证件号码，联系电话，邮寄地址，电邮地址和照片）。 该政策可在本公司网站上查寻，网址为 https://fa.com.sg/data-protection-policy/.

By submitting this form, you are deemed to have read and understood FAPL’s Personal Data Policy.

提交此表格，即表示您已阅读并理解鑫盟理财私人有限公司的个人数据政策