How Singapore's Housing Protection Scheme (HPS) protects HDB homeowners.

Anyone who has just bought an HDB may be surprised to receive a letter from the government that you're now covered under the Home Protection Scheme. And its compulsory, meaning you can't opt out of it.

So, the question is, what is this HPS, and why do you suddenly need to pay for this additional coverage?

Understanding how HPS works

The Housing Protection Scheme (HPS) is a mortgage-reducing term insurance that helps HDB homeowners who cannot repay their mortgage in the event of death, terminal illness or total permanent disability. Under the HPS, if the homeowner passes away, is terminally ill or suffers from total permanent disability, their family can apply to have their outstanding mortgage loan balance fully paid off.

The HPS is not a unique insurance product. You'll find similar mortgage insurance by private insurers that offer similar coverage.

However, HPS is relatively more affordable than many private insurance plans.

Who is eligible for the HPS

As mentioned, all Singaporean citizens and Permanent Residents who own an HDB flat with a mortgage loan are immediately enrolled on the Housing Protection Scheme (HPS). However, this is if you're using CPF to pay off your monthly home loan instalment. If you're using cash instead, it's not compulsory, although you can still opt-in.

Unfortunately, private properties, executive condominiums (ECs) and privatised HUDC flats are not eligible. And for these homeowners, you will need to buy private mortgage insurance to beef up your insurance coverage.

What if there are multiple HDB owners?

If you're a joint owner of an HDB flat, the Housing Protection Scheme (HPS) will still cover you. This is regardless of whether you're the co-owner with your spouse, parent or child. In fact, even if you have different mortgage lenders, as long as you're all listed on the HDB title deed, you'll all be protected.

The coverage amount will be pegged to each owner's contribution percentage. So, if you share the outstanding home loan 50-50, then the coverage for each of you will be 50% of the outstanding amount when making a claim.

You can choose to increase the coverage for each of you to 100%, but that will mean a higher premium.

Alright, sounds good, but how are the premiums calculated?

Paying higher loan amounts and/or shorter payback periods will result in greater HPS premiums. The older you are, the more expensive your premium will likely be. Premiums for men are generally higher than those for women.

In most cases, HPS premiums are calculated based on the following factors:

1. Outstanding housing loan on the HDB

2. Loan repayment period of the HDB

3. Type of loan (HDB concessionary loan or bank loan)

4. Age and gender

In addition, your premiums can be paid via your CPF OA. Also, if your OA doesn't have enough balance for the HPS premium and your housing loan, the HPS premium has priority to avoid your coverage lapsing.

Still not convinced and want to opt out?

As mentioned, this scheme is compulsory for anyone using their CPF to make their monthly loan repayment. However, there are ways to opt-out if you still desire.

You'll need to have at least one of the following types of insurance policies:

• Whole life insurance

• Term life insurance

• Endowment plan

• Life riders (must be attached to a basic policy)

• Mortgage Reducing Term Assurance (MRTA) / Decreasing Term Rider

These policies must cover you for death, total permanent disability and terminal illness for the unpaid sum of your home loan up to the entire term of the loan or age 65, whichever is earlier.

Concluding Thoughts

Ultimately, the Housing Protection Scheme (HPS) is a comprehensive insurance plan that covers Singaporean citizens and Permanent Residents who own an HDB flat with a mortgage loan. It's a great way to ensure that your loved ones are taken care of in the event of an unfortunate demise and offers peace of mind knowing that your home is protected.

So, if you are on the scheme and don't have any form of coverage, it's a good idea to stick with it.

If you're still not sure and would like to discuss this further, I'm always happy to meet up with you and discuss your financial plans.