What exactly is the Home Protection Scheme (HPS)
Buying a home is not fun and games all the time. Even though getting your first home can be super exciting, it also often involves a series of demanding tasks. This includes handling renovations, sorting through paperwork, negotiating for a good price, battling with Cash over Valuation and securing home insurances. For individuals purchasing HDB flats, an additional key aspect to consider is the Home Protection Scheme (HPS).
Introduced over twenty years ago, HPS underwent a reduction in premiums on July 1, 2021, following a similar decrease in 2018. For new homeowners, understanding the nuances of HPS is critical. Here are some important details of the HPS to know!
Understanding Home Protection Scheme (HPS)
HPS is an insurance plan designed to safeguard homeowners and their families from potentially losing their HDB flats under unfortunate circumstances such as death, terminal illness, or total and permanent disability. It ensures the complete repayment of the outstanding mortgage, with the insured amount decreasing in accordance with the remaining home loan balance.
Eligibility Criteria for HPS
Mandatory for HDB flat owners using their CPF (Central Provident Fund) savings to service their housing loan, eligibility for HPS begins when several conditions are met. These include being the legal owner of the flat, completing loan formalities with HDB or approved mortgage entities, submitting a health declaration for HPS, and paying the initial premium.
Duration of HPS Coverage
Coverage under HPS varies depending on when you joined the scheme. For those insured after March 1, 2001, coverage lasts until age 65 or until the housing loan is fully paid off, whichever is earlier. For some who are insured earlier, coverage extends until age 55 to 60.
HPS Coverage for Co-owners
HPS allows for separate coverage for co-owners of a property, including spouses. The coverage can be split in various ratios, ensuring the total coverage equals at least 100% of the outstanding loan. Co-owners can even opt for full coverage each, though this increases the premium cost by a little.
The Cost of HPS
The annual HPS premium depends on factors like the outstanding housing loan, loan type, repayment period, and the applicant's age and gender. Typically, a larger loan or extended repayment period results in a higher premium. Usually, premiums are payable for only 90% of the coverage period. You can actually use CPF’s website to calculate your estimated HPS premiums here.
Paying the HPS Premium
Premiums for HPS are automatically deducted from the CPF Ordinary Account annually, prioritized over monthly housing instalments. In cases of insufficient funds, notifications are sent to you to remind you to top up the account. Payments can be made through various channels, including eNETS, Paynow, or at SingPost branches. Co-owners can also use their CPF OA money to pay for HPS.
Applying for the HPS
Applications for HPS differ based on the type of loan. For HDB loans, applications are made at HDB offices, while bank loan holders must apply through the 'my cpf' portal.
Opting Out of HPS
While HPS is generally recommended, opting out is possible if alternative insurance policies are in place, such as whole life, term life, endowment plans, or Mortgage Reducing Term Assurance (MRTA). However, if you are using your CPF OA to pay for your monthly housing instalments of your HDB flat, it is COMPULSORY for you to be insured under HPS even if you have other private policies in place.
Comparing HPS with Private Mortgage Insurances
Key differences between HPS and private mortgage insurances include transferability, age coverage limits, and the direct repayment method to HDB or banks by HPS. Although HPS is generally more affordable, private plans offer customizable options based on your situation.
Essentially, the Home Protection Scheme is an important safety net for HDB flat owners, ensuring the loan is covered in case of unforeseen circumstances. It is generally more affordable than private plans but less customisable to your situation. The HPS is a government-mandated, cost-effective solution that complements private insurance plans, providing good and comprehensive coverage for homeowners.
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