In addition to their love for acronyms, the federal government additionally has a tender spot for schemes. And in the event you’re an HDB flat proprietor, the House Safety Scheme (HPS) is likely one of the many schemes you could be pressured to participate in.
In a nutshell, the HPS affords insurance coverage safety that ensures that you simply and your loved ones is not going to lose your HDB flat in the event you die and may’t repay your own home mortgage. Let’s discover out extra about it.
What is that this House Safety Scheme (HPS)?
The House Safety Scheme (HPS) is a mortgage-reducing time period insurance coverage scheme that protects HDB flat consumers/house owners.
When you work as an insurance coverage agent, you’re already nodding your head in understanding. For everybody else muttering “mortgage… whut…?”, mortgage insurance coverage affords life insurance coverage safety for any sums nonetheless owing on your own home mortgage.
You or your loved ones will qualify for a declare in the event you (or whoever is paying for the HDB flat) die, are recognized with a terminal sickness, or turn out to be completely and completely disabled. The quantity of the declare would be the remaining sum on your own home mortgage.
So, in the event you go away whenever you nonetheless owe $100,000 on your own home mortgage, this will probably be paid in full by the HPS. Your loved ones thus doesn’t have to fret about dropping the flat or having to take over mortgage repayments in your absence.
Insurance coverage corporations promote mortgage insurance coverage that does the identical factor, so in the event you’re shopping for an HDB flat and are already coated by HPS, you don’t want to purchase a separate coverage except you need further protection. In comparison with non-public mortgage insurance coverage, HPS is kind of low cost.
Who’s eligible for HPS? Is it obligatory?
HPS is obligatory for any HDB proprietor utilizing CPF to pay the month-to-month house mortgage instalment. (HDB flats excludes govt condominiums and privatised HUDC flats.)
If you’re shopping for an HDB flat however not utilizing CPF to pay the house mortgage, you’re nonetheless eligible for the House Safety Scheme and may decide in.
You might be NOT eligible for the House Safety Scheme in the event you purchase non-public property, govt condominiums (ECs) or privatised HUDC flats, however you should purchase non-public mortgage insurance coverage. You possibly can evaluate mortgage insurance coverage simply on MoneySmart.
For these insured after 1 March 2001, you can be coated by the HPS till the age of 65 or till your housing mortgage is paid up, whichever is earlier.
How does HPS work with a number of house owners?
When you’re shopping for a flat along with your partner or member of the family, you’re more likely to be co-owners. So how does the House Safety Scheme work then?
For these enrolled beneath the obligatory House Safety Scheme, the whole protection of all of the house owners must be not less than 100% of the excellent house mortgage (however it may be extra). So in the event you and your partner pay equal quantities to your HDB flat, you possibly can every be coated for 50% of the mortgage.
For instance, you and your accomplice have an excellent house mortgage of $100,000. To satisfy the minimal requirement, your whole HPS protection wants so as to add as much as $100,000 — so yours may be $50,000 and hers $50,000.
However you too can go for a unique ratio, e.g. you’re coated for $80,000 whereas she’s coated for $20,000. That is helpful if you’re not splitting the mortgage down the center.
You too can be kiasu and insure each of you for the utmost of 100% every. So you’re coated for $100,000 and she or he is roofed for $100,000 too. That means, if certainly one of you dies, the house mortgage will probably be absolutely paid for. Nonetheless, the premiums will probably be increased.
How a lot are my HPS premiums?
HPS premiums are calculated primarily based on the next elements:
- Excellent housing mortgage on the flat
- Mortgage reimbursement interval of the flat
- Kind of mortgage (HDB concessionary mortgage or financial institution mortgage)
- Age and gender of member
Usually, a better mortgage quantity and/or a shorter reimbursement interval will increase your HPS premiums. The older you’re, the upper your premium will probably be. Mens’ premiums additionally are typically increased than ladies’s. You need to use this calculator to estimate your premiums.
A bit of excellent information: You solely want pay premiums for 90% of your cowl interval. So, if you’re coated for 30 years, you’ll pay premiums for under 27 years.
Pattern premium: Utilizing the CPF HPS calculator, a 30-year-old man looking for protection for a 25-year house mortgage of $300,000 might want to pay $240 a 12 months for 22 years.
Can I take advantage of CPF to pay HPS premiums?
Sure. The annual premium will probably be deducted mechanically out of your CPF OA.
In case your OA doesn’t come up with the money for for each the housing mortgage and HPS premium, the HPS premium takes precedence (in order to keep away from your protection lapsing).
In case your OA nonetheless doesn’t have sufficient to pay the HPS premium, you’ll be notified by CPF. You possibly can both get a co-owner to pay for it utilizing their CPF OA financial savings, or pay by money/eNETs/PayNow/AXS.
Those that are financially affected by COVID-19 can request to defer their HPS premium. It’s greatest to not let your protection lapse, if attainable — if you wish to reapply for HPS, you might want to bear medical underwriting and won’t even be eligible on account of your well being situation.
Is it attainable to decide out of the House Safety Scheme?
For these for whom HPS is obligatory, you possibly can apply to decide out in case you have one of many following kinds of insurance coverage insurance policies:
- Entire life insurance coverage
- Time period life insurance coverage
- Endowment plan
- Life riders (should be hooked up to a fundamental coverage)
- Mortgage Lowering Time period Assurance (MRTA) / Lowering Time period Rider
The coverage or rider should cowl you in the event you endure from demise, terminal sickness and whole and everlasting incapacity for any unpaid sums on your own home mortgage as much as the total time period of the mortgage or till you hit the age of 65, whichever is earlier.
To get exempted from HPS, apply on-line by way of the CPF web site. Log into your CPF account, go to My Requests > House Safety Scheme (HPS) > Apply to be Exempted from HPS.
HPS vs mortgage insurance coverage: What’s the distinction?
HPS is a type of mortgage insurance coverage. Nonetheless, it differs in some methods from non-public mortgage insurance coverage, which you should purchase from main insurers like those beneath:
For one factor, HPS is just not transportable. So, in the event you promote your HDB flat and purchase one other house, you can’t simply switch HPS to the brand new property. You’ll should terminate the plan and reapply for an additional, which can have an effect on your premiums.
In addition to that, HPS additionally has some moderately particular phrases, resembling protecting you solely till the age of 65. Non-public mortgage insurance coverage, then again, might have a later or no most age. This is a vital one to notice if you’re an older HDB flat proprietor.
One other distinction is that the HPS will repay the HDB or your financial institution instantly if a profitable declare is made. Mortgage insurance coverage, then again, might give the payouts on to you or your loved ones, relying on coverage phrases.
Additionally, private mortgage insurance coverage may also have some riders or add-ons that you could customise to your liking, like riders that may waive your premiums or provide crucial sickness protection.
That mentioned, HPS is comparatively cheap in comparison with mortgage insurance coverage available on the market. So, in the event you qualify for HPS, it’s a good suggestion to get it. You possibly can all the time add extra protection in the event you really feel that you simply want it.
HPS vs life insurance coverage: Which is healthier?
You possibly can decide out of HPS in case you have life insurance coverage, however the two kinds of insurance policies are literally fairly completely different. Some examples of time period life insurance coverage beneath:
For one factor, the protection is structured in another way. HPS is pegged to your excellent house mortgage, so the sum assured decreases as you make mortgage repayments, and it ends when you could have absolutely paid off your own home mortgage.
Alternatively, life insurance coverage safety doesn’t lower as you repay your own home mortgage. That additionally means you can find yourself being under- or over-insured sooner or later except you alter your sum assured.
Each HPS and life insurance coverage can cowl your own home mortgage, however for all times insurance coverage extra work is concerned in your half in calculating your safety wants and ensuring you’ve factored in your house mortgage repayments.
There’s nothing stopping you from getting each life insurance coverage and HPS. In actual fact, you most likely ought to have each if you’re shopping for an HDB flat and have dependents.
What ought to I do with my HPS then?
If HPS is obligatory for you, then there’s not a lot you are able to do. However even in the event you’re in a position to decide out of the scheme, we’d suggest hanging on to your HPS anyway.
Your non-public insurance coverage protection would possibly lapse in the event you fail to pay the premiums on account of monetary difficulties. HPS, then again, is mechanically paid via CPF (and CPF may be fairly forgiving if you’re unable to pay). So consider it as your security web.
You probably have or plan to purchase life insurance coverage, HPS will help you get monetary savings. You possibly can go for a decrease sum assured in your life insurance coverage coverage since your mortgage repayments are already coated by HPS, so that you pay decrease life insurance coverage premiums.
Do be certain to evaluate your insurance coverage protection every so often. You’ll want to regulate your HPS protection in case you have:
- Switched to an extended or shorter mortgage bundle
- Partially redeemed or paid up your own home mortgage
- Modified your share of repaying the house mortgage
You possibly can write in to CPF to regulate your HPS protection to ensure you’re not underinsured or overpaying to your protection.
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