Mortgage insurance is something all homeowners should pay attention to, regardless of whether they reside in an HDB flat or private property. While you're at it, learn how unsecured loan insurance and business loan repayment insurance could benefit you.
There are many things homeowners and potential homeowners need to think about. That’s just the reality of adulting. Mortgage insurance is not the same as home insurance or fire insurance — they have very different functions — yet it often flies under the radar despite its significance.
While these aren’t discussed nearly enough, it would be good for anyone to also gain more knowledge on unsecured loan insurance and business loan repayment insurance — who knows when these might come in handy?
- What is mortgage insurance?
- How does mortgage insurance work?
- HDB Home Protection Scheme vs Mortgage Insurance
- Do you really need mortgage insurance?
- Where can you buy mortgage insurance?
- Unsecured loan insurance
- Business loan repayment insurance
What is mortgage insurance?
Mortgage insurance safeguards your home and family against the unexpected. It protects your dependents by ensuring they will have a roof over their head, come what may. Your dependents will not have to worry about any outstanding home loan should misfortune or tragedy strike.
How does mortgage insurance work?
Also known as Mortgage Reducing Term Assurance, a mortgage insurance’s sum assured (i.e. coverage) decreases as the policy term ages. This is logical: the outstanding home loan amount decreases as monthly instalments are paid.
Mortgage insurance works by settling one’s outstanding home loan should anything unfortunate happen to the homeowner. By unfortunate, we mean truly ill-fated and unpredictable events like death, total permanent disability, and terminal illness.
That brings us to our next point: the HDB Home Protection Scheme and private mortgage insurance offered by insurers — two oft-overlooked but important tools for homeowners in Singapore.
HDB Home Protection Scheme vs Mortgage Insurance
| HDB Home Protection Scheme | Mortgage Insurance | |
| Insurance type | Mortgage-reducing insurance | Mortgage-reducing insurance |
| Designed for | HDB flat owners who use CPF savings to pay for their monthly housing loan instalments | Home owners of private residential properties (e.g. ECs, condominiums, landed housing, and HUDC flats |
| Main benefit | Protects your family home in case of death, terminal illness or total permanent disability | Protects your family home in case of death, terminal illness or total permanent disability |
| Payout recipient | HDB or bank | The bank, you or your family, depending on policy terms |
| Transferability | Not portable; it is tied to the property | Can be transferred from one property to another; it is tied to the policyholder |
#1 HDB Home Protection Scheme only covers HDB flats
The HDB Home Protection Scheme protects homeowners up to age 65 or until the housing loan is fully paid, whichever is earlier. It doesn’t matter whether you’re using a HDB loan or bank loan; it is available to HDB flat owners who use their CPF savings to pay for their monthly housing instalments.
Good news? You don’t need to fork out cash. The annual premium is automatically deducted from your CPF OA savings. For folks who don’t have sufficient funds to pay for both their housing loan and HDB Home Protection Scheme premium, priority will be given to the latter. This prevents one’s coverage from lapsing.
From 1 July 2021, homeowners under the HDB Home Protection Scheme will enjoy an average reduction of 10% on their premiums.
#2 Private mortgage insurance can offer extra perks
Did you know HDB flat owners can also go for private mortgage insurance if that’s what they prefer? Private mortgage insurance isn’t just reserved for people living in private properties.
One sweet perk you need to know: you can transfer your mortgage insurance policy to your new property in the event that you move or upgrade — which can help you avoid paying higher premiums since premiums typically rise as one ages. This, however, is not possible with the HDB Home Protection Scheme. The HDB Home Protection Scheme will be terminated when you’ve fully paid your loan or upon the sale of your flat.
Another benefit is that you and your co-owner can get a joint insurance plan when you go the private route. Make sure to do ample comparisons before settling on the most suitable mortgage insurance policy for your family’s needs.
A private mortgage insurance plan also gives you the option to add on riders and benefits. Some common ones include:
- Personal accident benefit
- Living accelerator benefit
- Waiver of premium benefit
- Early-stage crisis waiver
- Cash advance for funeral expenses
- Joint life coverage for both co-owners
- Choice of single or regular premium payments in one-year intervals, from 10 to 30 years
- Policy term of up to 40 years vs HDB Home Protection Scheme’s 30 years
#3 Make sure you are not over- or under-insured
To ensure that you're properly insured when buying mortgage insurance, your mortgage insurance rate shouldn't be higher or lower than your home loan interest rate. This is crucial because the last thing you want is to be over- or under-insured.
Remember that any insurance payout will be in accordance with the owed home loan amount, so extra insurance doesn't make sense. In a similar vein, you don’t want the insurance payout to be less than the home loan amount owed. This is why it’s super important that your mortgage insurance rate is pegged to your home loan interest rate.
While you’re at it, ensure that your home loan tenure and mortgage insurance cover period match, too!
Do you really need mortgage insurance?
As important as home insurance and fire insurance are, you’ll also want to have mortgage insurance to safeguard your home as well as your loved ones.
It is always a good idea to protect your dependents from having to shoulder the financial responsibility associated with making mortgage loan repayments just so they can continue living in the house.
However, you may consider not getting a mortgage insurance policy if you’re certain you have sufficient private insurance coverage (think: whole life insurance, term life insurance etc) that meets or exceeds the outstanding housing loan amount owed in the event of your death, total permanent disability or upon diagnosis of terminal illness.
Where can you buy mortgage insurance?
Major life insurers in Singapore offer private mortgage insurance. Those who are taking a bank loan to pay for their monthly home loan instalment can reach out to their bank, too. Banks typically have tie-ups with insurers to offer such protection plans for their customers.
What about HDB’s Home Protection Scheme? Those who are taking a HDB loan can apply to be covered under the scheme at the HDB office or any HDB branch office when applying to use their CPF for their monthly housing instalments.
If you’re taking a bank loan, you’ll have to first apply to be covered at my cpf Online Services > My Requests > Home Protection Scheme (HPS) > Apply for/Adjust HPS Cover (Ref: HPS/45). This step must be completed before you apply to withdraw your CPF savings for your monthly housing instalments via e-Housing.
Unsecured loan insurance
To understand unsecured loan insurance, you’ll first have to know what unsecured loans are. Basically, unsecured loans do not require borrowers to pledge any collateral. Some common unsecured loans include credit cards, personal loans and credit lines.
Born out of the unpredictability of life, unsecured loan insurance offers you peace of mind in the event of accidental death, total permanent disability, upon diagnosis of critical or early cancer or terminal illness, depending on the insurance policy’s terms.
By making premium payments, you’ll get to enjoy coverage on your outstanding unsecured loan balances up till the amount you’re covered for. This protects your loved ones from having to bear the financial burden should anything untoward happen to you.
Keep in mind not all banks offer such insurance products at the moment. DBS offers CardCare Protector and CashCare Protector; UOB offers CreditSure Plus, and Citibank offers Credit Insure Gold.
Friday Finance, a licensed moneylender, offers complimentary personal loan protection insurance for anyone who takes up a personal loan with them. The coverage will kick in in the event of an accident.
Business loan repayment insurance
Unpredictability doesn’t just affect one’s loved ones and home. For businesses, there’s an added layer of complexity to consider: the need to safeguard the business as it grows.
This is where business loan protection shines the brightest — it helps protect your business, partners and family should anything untoward happen to you.
For example, the DBS Business Loan with Loan Repayment Insurance gives business owners that much-needed peace of mind. Besides providing accidental insurance coverage of S$100,000 per insured person (for up to two partners/guarantors/directors/owners of companies/firms), it offers a Skip Loan Benefit for up to three DBS Business Loan monthly instalments, subject to a cap of S$3,000 per month if the insured party is hospitalised for at least seven days due to an accidental injury.
UOB’s Business Loan Protection gives business owners assurance, too. It helps to insure credit obligations against total and permanent disability and/or death of life insured. This also ensures that the burden associated with credit obligations doesn’t have to weigh on the life insured’s estate and or business partner(s) upon his or her death. The insurance payout could ideally help repay the outstanding business loan, too.
Read these next:
Best Mortgage Insurance In Singapore (2021)
Attention, HDB Flat Owners: 10 Things You Need To Know About The Home Protection Scheme
Home Insurance Promotions And Discounts To Protect Your Home (June 2021)
Is Home Insurance The Same As My HDB Fire Insurance?
All The Legal Loan Limits You Need To Know About In Singapore
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