Getting a home loan might feel like a huge milestone – but what if something unexpected happens before it’s fully paid off?
As someone who’s reviewed hundreds of insurance plans and seen firsthand how people can unknowingly leave their families financially vulnerable, I can tell you this: mortgage insurance isn’t just another add-on.
In this post, you’ll learn:
- What mortgage insurance actually is (and how it works in Singapore)
- The different types like HPS, MRTA, and LTA
- Whether you need one – and how much coverage is enough
- How premiums are calculated and what affects your cost
So if you’re taking on a housing loan – especially your first – and want to protect both your property and your peace of mind, keep reading.
What is mortgage insurance and how does it work?
Mortgage insurance is a type of insurance policy that covers your outstanding mortgage loan if something serious happens to you – like death, total permanent disability (TPD), or being diagnosed with a critical illness.
Let’s say you’re the primary breadwinner, and you’ve taken out a 25-year mortgage.
If something unfortunate happens and you can no longer contribute to your mortgage payments, the insurance kicks in and pays off the remaining loan.
So your loved ones don’t have to stress about loan repayments or, worse, risk losing the home altogether.
That payout?
It’s usually a lump sum to clear your home loan with the bank.
In Singapore, this is especially important because of how property prices and loan sizes tend to stack up.
How does mortgage insurance protect homeowners and their families?
Mortgage insurance steps in like a financial safety net when an unexpected illness, accident, or even death happens to you, and your mortgage still needs to be paid.
And if you’re the main income earner in your household, the burden falls on your loved ones.
With mortgage insurance, your insurer provides a lump sum payout to clear the remaining loan balance with the bank.
That means no one comes knocking to repossess your property, and your family isn’t forced to sell the home just to make ends meet.
It gives you peace of mind, knowing that your family still has a roof over their heads should the worst happen.
What are the different types of mortgage insurance?
If you’re buying an HDB flat and using your CPF Ordinary Account (OA) savings to pay for your loan, chances are you’re already covered under the Home Protection Scheme (HPS).
HPS is mandatory for eligible HDB owners unless you’ve applied for an exemption (which only gets approved if you have adequate private coverage).
It’s administered by the CPF Board and protects you in the event of death, TPD, or terminal illness before the age of 65.
Mortgage Reducing Term Assurance (MRTA) is your private insurance alternative to HPS – and it works similarly.
As you repay your home loan, your coverage decreases with your loan balance.
This makes sense if your only goal is to protect your mortgage and nothing else.
Now, if you’re the kind who prefers fixed coverage regardless of how much you owe, Level Term Assurance (LTA) might be more up your alley.
Unlike MRTA or HPS, LTA doesn’t decrease over time.
The sum assured stays the same throughout your policy.
How are premiums for mortgage insurance calculated?
Loan amount
The bigger your mortgage, the more you’ll pay in premiums.
Makes sense, right?
If you’re borrowing $1.2 million for a private condo, your insurer is taking on a higher risk than someone with a $400,000 loan for a resale HDB.
But don’t make the mistake of underinsuring just to save a bit on premiums – your goal is to cover the entire outstanding loan in case something happens.
Loan tenure
A longer loan tenure means more years of coverage, which can slightly bump up your total premiums.
But don’t be tempted to opt for a shorter tenure just to save on premiums – especially if it puts you under unnecessary financial pressure.
Also, if you’re going for level term insurance, some plans won’t let you extend the term later – so plan.
Owners’ age
Let’s face it – age catches up with all of us.
And when it comes to mortgage insurance, your age plays a big role in how much you’ll pay.
Generally, the younger you are, the lower your premiums.
Why?
Because insurers see younger applicants as lower risk – less likely to fall seriously ill or pass away during the loan period.
Owner’s gender
It might sound odd, but yes – your gender also affects your mortgage insurance premiums.
Statistically, women tend to live longer and have slightly lower health risks.
Because of this, female applicants usually enjoy slightly lower premiums than their male counterparts, all other things being equal.
Medical status
Your health can make or break your mortgage insurance application.
When you apply, insurers will assess your medical history and sometimes require you to go for a medical check-up.
This is especially so if you’re applying for a higher coverage amount or above a certain age.
Income
Insurers may ask for proof of income, especially if you’re applying for a large sum assured (like $1.5 million and above).
This ensures that the plan is financially viable for you and that you’re not biting off more than you can chew.
But don’t worry – your income doesn’t directly affect your premium rate.
It’s mainly used to verify affordability and ensure you’re not being over-insured.
Think of it like this: The insurer is doing a quick sense check to ensure you’re not paying $6,000/year on premiums with a $3,000/month salary.
Is mortgage insurance mandatory?
Mortgage insurance isn’t legally mandatory in Singapore but for most homeowners, it’s strongly recommended.
After all, a home loan is usually the most significant financial commitment you’ll ever make.
If something happens to you and there’s no insurance in place, your family could be left with a massive loan and no clear way to repay it.
If you’re an HDB owner using CPF OA savings to pay for your monthly home loan instalments, you’re automatically enrolled in the Home Protection Scheme (HPS).
In this case, HPS is compulsory unless you apply for an exemption.
To opt out, you’ll need to show that you already have sufficient coverage through personal insurance plans – like a term policy, whole life plan, or mortgage insurance with equal or greater benefits.
You’ll also have to submit the request to CPF, which will assess whether your existing coverage meets its criteria.
Why should private property owners consider mortgage insurance?
Just because it’s not required by law doesn’t mean you should skip it.
And let’s be real – private homes usually come with larger loan amounts, longer tenures, and higher monthly repayments.
If something unexpected happens, mortgage insurance will ensure a lump sum payout from your policy so your loved ones can continue living in the home.
Your absence could create serious financial strain, especially if you’re the main income earner.
Mortgage insurance gives your family time and space to adjust without worrying about money.
If no one can keep up with the monthly payments, the bank can take over your home and sell it.
With insurance in place, this worst-case scenario can be avoided entirely.
How to determine if I should get a mortgage insurance plan?
1. Check if you’re already covered under the HPS
If you’re using CPF OA savings to pay for your HDB home loan, you’re automatically enrolled in HPS – and in most cases, that’s enough to cover your mortgage.
To double-check, just log in to the CPF portal with your Singpass and head over to the Home Ownership dashboard.
It’ll show you if you’re covered, how much you’re insured for, and how long your coverage lasts.
2. Sole breadwinner
Now, if you’re a sole breadwinner and you’re not covered under HPS – or if your existing life insurance isn’t enough to pay off your entire home loan – then getting a mortgage insurance plan is something you should seriously consider.
It ensures that your family won’t be left with loan repayments if something happens to you.
3. Check if you have sufficient whole life or term life insurance coverage
Even if you’re not under HPS, there’s a chance your mortgage is already covered – especially if you’ve got a whole life or term life insurance plan with a high enough sum assured.
But don’t assume – check the policy details.
And if you co-own your property with a partner, it’s worth looking into their coverage too.
If one of you is underinsured, the surviving party could end up with the full mortgage on their shoulders.
4. Plans to move
If you’re currently under HPS but planning to upgrade to a new flat or private property, remember that your HPS coverage won’t carry over.
It’s tied to the specific HDB flat you’re staying in.
Once you sell and move out, the plan ends – and you’ll need to cancel it and reapply for a new one.
On the flip side, if you’re on a Mortgage Reducing Term Assurance (MRTA) plan from a private insurer, the policy is tied to you, not your property.
If you move to a new home, your coverage follows you – no reapplication is needed.
How much mortgage insurance do I need?
Single applicant
If you’re applying on your own, this one’s pretty straightforward.
Your mortgage insurance should cover your home loan in case something unexpected happens.
That way, your family won’t be left scrambling to figure out how to manage the remaining repayments.
For example, if your outstanding loan is $500,000, your assured sum should also be $500,000.
Joint applicants
If you’re applying for mortgage insurance with your partner or a co-owner, the goal stays the same – your plan should still cover the entire outstanding loan if either of you passes on.
Why?
Because you don’t want the surviving co-owner to be stuck paying off the full mortgage alone.
You can split the premiums however you prefer – 50/50, 70/30, or whatever works best for your situation.
Frequently asked questions
Is it worth it to buy mortgage insurance?
Yes, mortgage insurance is worth it for most homeowners – especially if you’re the sole breadwinner or have a large outstanding loan.
Mortgage insurance is worth it because it ensures your family won’t be left with unpaid debt or risk losing the home if something happens to you.
While it’s not mandatory for private property owners, having this protection gives peace of mind and financial security.
The payout from mortgage insurance can fully cover your remaining loan, which helps your loved ones keep the home without financial stress.
What happens if I fully repay my mortgage early?
If you fully repay your mortgage early, what happens to your mortgage insurance depends on the type of plan you have.
For most Mortgage Reducing Term Assurance (MRTA) or Home Protection Scheme (HPS) plans, coverage ends once the loan is cleared since there’s no more loan to protect.
You won’t get a refund on unused premiums unless your policy has specific refund features (which is rare).
For Level Term Assurance (LTA), the policy can continue until the end of the term, and you might choose to keep it for other protection needs.
Can I use my CPF to pay for mortgage insurance?
Yes, you can use your CPF to pay for mortgage insurance but only if you’re under the Home Protection Scheme (HPS).
CPF members using their Ordinary Account (OA) to pay for their HDB home loan are automatically covered under HPS, and the premiums are deducted directly from their CPF.
However, if you choose a private mortgage insurance plan like MRTA or LTA, you must pay the premiums in cash.
CPF funds cannot be used for private insurance policies outside of HPS.
How do I claim my mortgage insurance?
To make a claim on your mortgage insurance, you’ll need to contact your insurance provider (or CPF Board, if you’re under HPS) and submit the necessary documents.
For private mortgage insurance like MRTA or LTA, the process typically involves providing the death certificate, medical reports, and proof of mortgage.
The insurer will assess the claim, and once approved, the lump sum payout will go towards clearing the outstanding loan.
If you’re under the Home Protection Scheme (HPS), claims are made through the CPF portal, and CPF will settle the loan directly with HDB or the bank. Any excess claim amount will be credited to the insured member’s CPF OA.
Does home insurance cover mortgage payments?
No, home insurance does not cover mortgage payments.
Home insurance is designed to protect the physical structure of your home, renovations, and sometimes your belongings – in case of fire, theft, or other damages.
It doesn’t help you repay your housing loan if something happens to you.
Mortgage insurance covers your outstanding loan amount in the event of death, total permanent disability, or critical illness, so your family can’t repay the mortgage on their own.
Both serve different purposes, and it’s common (and wise) to have both.
Conclusion
So, there you have it – mortgage insurance might not be the most exciting topic, but it’s one of those things that could make a difference when life throws a curveball.
We’ve covered what mortgage insurance is, how it works, the different types available (HPS, MRTA, and LTA), how premiums are calculated, and how to decide if you need it.
Whether you’re a single applicant or buying a home with someone else, the key is ensuring your loved ones aren’t left to deal with a huge loan on their own.
Still unsure about which type suits you best or whether you’re already covered?
You’re not alone – and you don’t have to figure it out by yourself.
If you’d like some help, we can connect you with one of our licensed financial advisor partners – no pressure, no hard selling, just someone to walk you through your options.
And yes, it’s completely free.
