When protecting your home and family, choosing the right insurance plan can be tricky.
Should you go with the Home Protection Scheme (HPS), mortgage insurance, or term life insurance?
Each option caters to different needs, and understanding the differences can help you make a more informed decision.
Let’s break them down into key factors:
| Factors | Home Protection Scheme (HPS) | Mortgage Insurance | Term Life Insurance |
| Housing coverage | HDB flats | HDB flats and private properties | Can cover HDB flats and private properties |
| Sum assured | Matches your home loan or up to your home loan amount | Variable, up to profile and insurer limits | |
| Coverage | Coverage reduces as your loan decreases | Fixed coverage | |
| Premiums | Fixed premiums | ||
| Payment method | CPF OA (Can use cash if CPF OA funds run out) | Cash | |
| Claims recipient | Policyholder | Nominated beneficiaires | |
| Transferability | Tied to your HDB flat. Coverage ends if you sell the flat or pay off the loan. | Flexible – coverage can be transferred to a new property if you upgrade or move. | Coverage is tied to you, not the property. Remains active regardless of where you live or how many properties you own. |
| Cost | Most cost-effective option. Premiums are generally lower due to CPF system integration. | Affordable, with costs generally lower than term insurance. Offers value for tailored coverage. | Typically more expensive due to fixed coverage and additional benefits. Offers comprehensive protection for broader needs. |
What is the Home Protection Scheme (HPS)?
The Home Protection Scheme (HPS) is a compulsory mortgage-reducing insurance scheme in Singapore administered by the Central Provident Fund (CPF).
It’s specifically designed for HDB flat owners who use their CPF savings to pay for monthly housing loan instalments.
HPS ensures that in the unfortunate event of your death, terminal illness, or total permanent disability, your outstanding housing loan is fully covered.
This provides much-needed financial relief to your family, giving them the security of retaining their home without the burden of repaying the remaining loan.
A key feature of HPS is its convenience – premiums are automatically deducted from your CPF Ordinary Account (OA).
This makes it hassle-free, though it’s worth noting that cash payments are required if your CPF OA balance runs out.
However, HPS is only applicable to HDB flat owners.
What is mortgage insurance?
Mortgage insurance is a specialised type of life insurance designed to safeguard homeowners’ housing loans in case of death, terminal illness, or total permanent disability.
It ensures that the outstanding mortgage balance is fully paid off, relieving your family of the financial burden and preventing the risk of losing their home during difficult times.
One of the key advantages of mortgage insurance is its flexibility.
The coverage can be tailored to match your housing loan amount and tenure, aligning with your financial needs.
This makes it suitable for both HDB and private property owners, offering broad applicability regardless of your home type.
Unlike the Home Protection Scheme (HPS), mortgage insurance is not mandatory, but it’s highly recommended if you have an outstanding housing loan.
The coverage is typically structured as mortgage-reducing insurance, which decreases over time as your loan is paid down.
What is a term plan?
A term plan is a straightforward life insurance policy that provides coverage for a specified period or “term.”
It’s designed to offer financial protection for your loved ones, ensuring they are supported if something happens to you during the policy term.
With a term plan, the coverage amount remains fixed throughout the policy.
If you pass away, become permanently disabled, or are diagnosed with a terminal illness during this period, a lump sum payout is made to your nominated beneficiaries.
You can choose coverage for a set number of years (e.g., 5 to 30 years) or up to a specific age, like 65 or 75.
As term plans focus solely on protection without building cash value or providing maturity benefits, they are generally more affordable than other types of life insurance.
Many term plans allow you to enhance your coverage with riders, such as critical illness or accidental death benefits, tailoring the policy to your needs.
Unlike mortgage-reducing insurance, a term plan’s coverage isn’t tied to a specific loan or property.
If you’ve paid off your mortgage, your policy remains active as long as you continue paying the premiums.
Conclusion
Choosing between the Home Protection Scheme (HPS), mortgage insurance, and term insurance can feel like navigating a maze, but it all comes down to your needs.
We’ve covered the basics: HPS is perfect for HDB owners using CPF and looking for affordable, straightforward coverage tied to their home loan.
Mortgage insurance gives you flexibility, works for HDB and private properties, and aligns with your loan balance.
Meanwhile, term insurance offers fixed coverage and is a cost-effective way to protect your family’s financial future, even beyond your mortgage.
If you want clarity or a personalised recommendation, why not chat with one of our trusted financial advisor partners?
The best part?
It’s completely free.
