The HDB Home Protection Scheme is an important tool for homeowners in Singapore. Here’s why.
Owning a HDB flat is an important milestone for the vast majority of Singaporeans and Permanent Residents. It is also no small feat, often requiring financial commitments of up to 25 years.
What if the owner(s) should meet with unfortunate events, like serious accidents or major illness, that disrupt their ability to continue paying for their flats? Would they or their family members have to go through financial hardship to keep up with the mortgage, or face the danger of losing their homes?
To prevent that from happening to HDB flat owners, the Home Protection Scheme (HPS) was introduced. Read on to find out how it can benefit you.
#1: HPS covers your liability towards your HDB flat mortgage
A mortgage-reducing insurance policy, the Home Protection Scheme protects you and/or your family from losing your HDB flat in the event of death, terminal illness or total and permanent disability.
All three of these events can severely affect your family’s ability to continue paying for your HDB mortgage. Affected homeowners may make a HPS claim for the remaining mortgage amount. They and/or surviving family members may continue to reside in the flat as per normal.
The scheme protects homeowners up to age 65 or until the housing loan is paid up, whichever is earlier.
HPS only covers HDB flats. It does not cover private residential properties, such as executive condominiums (ECs) or privatised Housing and Urban Development Company (HUDC) flats.
#2: You may apply for HPS regardless whether you’re using a bank loan or HDB loan
Whether you choose to pay your mortgage via a HDB loan or bank loan, you may apply for HPS, as long as your property is a HDB flat. You may also apply for HPS if you choose not to use your CPF savings to pay for your mortgage, and pay cash out of pocket instead.
For those using a HDB loan, you can apply for HPS cover at the HDB office or any HDB branch office when you are applying to use your CPF for the monthly housing instalment.
For those using a bank loan, you must first apply for HPS online over at the CPF website. This must be completed before applying to withdraw your CPF savings for your monthly housing instalments via e-Housing.
#3: HPS is optional if you do not use your CPF savings
Despite its important function, HPS is not mandatory for certain homeowners. If you are not using your CPF savings to pay for your HDB flat, you are not required to sign up for HPS.
However, it is highly recommended that you still take up the optional scheme (or have alternative arrangements) to protect yourself or your family from facing financial hardship or risk losing your home.
For those not using their CPF savings, you may apply for HPS online via the CPF website.
#4: You may be exempted from HPS if you have proper insurance coverage
You may apply for exemption from HPS as long as you have sufficient private insurance cover that meets or exceeds the outstanding housing loan in the event of the applicant’s death, terminal illness or total permanent disability, until the end of the loan term or age 65, whichever is earlier.
Only the following private insurance policies (traditional or insurance-linked) are applicable for HPS exemption:
- Whole Life
- Term Life
- Life riders (must be attached to a basic policy)
- Mortgage Reducing Term Assurance (MRTA) / Decreasing Term Rider
#5: HPS is not the same as home protection insurance (i.e. fire insurance)
Do not confuse HPS with traditional home and fire insurance protection policies – they have very different functions, as laid out in the following table:
|Home Protection Scheme (HPS)||Home or Fire Insurance Protection|
|Pays up remaining mortgage (if any) on behalf of homeowner in the occurrence of death, permanent and total disability, or terminal illness||Pays out pre-defined benefits in the event of loss or damage to property and contents. May also include personal liability against injuries or claims.|
|Applicable only to HDB flats||Applicable to residential properties of all types|
|Mandatory under certain conditions||Only fire protection for HDB flats is mandatory, further coverage for home contents is optional|
HPS and home insurance do not replace each other. Rather they complement each other and should be treated as important parts of your financial protection portfolio.
#6: Premiums for HPS vary according to certain factors
Your premiums for HPS are calculated based on:
- Outstanding amount of housing loan
- Remaining loan repayment period
- Whether your loan is concessionary or market-rate (ie, HDB or bank loan)
- Age and gender of the applicant (younger persons and females enjoy lower premiums)
Generally, the higher the loan amount, or the longer the repayment period, the higher the premiums. You may check your HPS premium amount using the HPS Premium Calculator tool.
You only need to pay HPS premiums for 90% of your HPS cover period. For example, if your cover period is 30 years, you only need to pay premiums for 27 years.
#7: HPS premiums take precedence over mortgage instalments
Your HPS premiums are automatically deducted from your CPF Ordinary Account (OA), same as with your mortgage instalments.
You should note that HPS premiums are given precedence over mortgage instalments, so as to ensure homeowners remain protected under the scheme. It is therefore important to keep an eye on the funds in your OA, although premium shortfalls may be paid up in cash.
Any relatives who are co-owners of the flat may also apply to use their CPF OA money to top up the shortfall.
#8: You need to make a health declaration to qualify for HPS
Auto-enrolment into HPS is not practised. Instead, you will be asked to make a health declaration when applying for the scheme.
In particular, you will be asked about:
- All your past and current illnesses;
- Any past or planned surgery; and
- Any physical or mental impairment.
Depending on your health status, there’s a chance your application may be denied. Should that be the case, you may wish to seek private insurance cover as an alternative (see #4 above.)
#9: There are exemptions under which HPS claims may be denied
Like all insurance policies, HPS claims are subject to certain exemptions. Here are the specific exemptions under which HPS claims will be rejected.
Applicants will not be able to claim under HPS if the following events occur within the first policy year of the cover:
- they committed self-inflicted injury or suicide, or
- they committed a criminal offence punishable by death, or
- the claim arose out of their own intentional criminal act.
Applicants may also have their HPS claims denied if:
- they were not in good health before the commencement of HPS cover, or
- they provided false or misleading information, or
- the claim arose from wars or any warlike operations or participation in any riot
#10: You may have received a one-time HPS premium rebate in Jan
If you have ever been covered under HPS from 9 November 2015, are a Singaporean or Permanent Resident, and have not made a claim under medical ground, you would have received a premium rebate earlier this year.
The CPF Board announced a one-time premium rebate in January 2020, attributed to prudent fund management and better-than-expected returns.
If you had qualified for the rebate, you would have automatically received it in your OA around mid-January.
Read these next:
Beginner’s Guide To CPF Retirement Sums (And How To Get There)
A Complete Guide To CPF In Singapore
Home Insurance Promotions And Discounts To Protect Your Home
5 Best Term Insurance Plans in Singapore (2020)
Is Home Insurance The Same As My HDB Fire Insurance?
By Alevin Chan
An ex-Financial Planner with a curiosity about what makes people tick, Alevin’s mission is to help readers understand the psychology of money. He’s also on an ongoing quest to optimise happiness and enjoyment in his life.