Home Protection Scheme (HPS) VS Private Mortgage Insurance

Having done our HLE, we know that it will be soon we will be getting the keys to our love nest and also entering the next milestones together making major decision in our life.

Thus, one of it is really deciding between HPS and a private mortgage insurance plan. We actually met up with our Financial Advisor to understand more about all this and we hope to share these information with you. Hopefully it help you in a way too. =)

1) So firstly, what is all this about?
It is basically getting yourself insured for your house in case (touch wood), anyone of you who is "paying" for the house via CPF becomes terminally ill, dead or permanently disabled that they can no longer work. 

2) So what is HPS?
The Home Protection Scheme (HPS) is a mortgage reducing insurance which insures CPF members and their families against losing their homes should members become physically / mentally incapacitated or pass away before their housing loans are paid up.

You have to be insured under HPS if you use CPF savings to pay your monthly housing instalments under HPS.
However, you can apply to be exempted from HPS if you already have a mortgage-reducing insurance or an appropriate life insurance policy that is enough to cover your outstanding housing loan up to the full term of loan or age 65, whichever is earlier, in the event of permanent disability or death.

3) So what is the difference between HPS and Private Mortgage Insurance?

• Portability / Transferability

For HPS, your HPS cover will be terminated if you sell your flat, or redeem your loan earlier. Similarly, if you buy a new flat such as upgrading, the HPS cover for your old flat will be terminated. Buying a new HPS may be more expensive at your prevailing age and is subjected to underwriting.
In short, HPS goes with the house not the person, so if you change house your HPS will be terminated and buying a new house will means buying a new HPS as well but the new price and all is subjected to the age you purchase the house and also many other stuff.

For Private Mortgage Insurance, the plan is portable. You do not need to cancel and buy another one for the new property. Instead, you just need to top up the difference between the sum insured and the outstanding mortgage loan.
In short this goes with the person, is kinda like a life / term plan you see, mean is the amount the insured, not the house. So now you may buy a house that cos $300k but you can choose to insure like $300k too. But in the future when you buy a new house that is $400k, you can choose to just keep the insured amount as $300k or top up but it is really up to you. If you feel that $300k is more than enough then it is fine.

• Extended Benefits / riders

For HPS, you are not able to add on benefits such as critical illness or personal accident coverage.
So no riders for HPS.

For Private Mortgage Insurance, the options to protect against critical illness or personal accident are available.

So means can add riders like any other insurance plan. 

• Claim Process

For HPS, CPF will liaise directly with HDB or the approved mortgagee to settle the outstanding housing loan up to the insured sum.
Means, you don't get the money, HDB just gets the remaining sum you "own" so you just simply don't need to pay them anymore.

For Private Mortgage Insurance, the insured sum of money will be given to the HDB flat appointed beneficiary. This allows full flexibility on how to make use of the cash, e.g. to pay for emergency expenses or, simply putting aside to generate potentially higher interest in concurrent with the housing loan payment instead of paying the loan lump sum.

Means, you get your insured sum as whole. And you can use the sum to pay and usually there will be excess if you choose to insured more than your mortgage amount. So you can use the money for whatever else. 

• Premium Rates

For HPS, there is only one rate and the premium will be deducted automatically from your CPF Ordinary Account (OA).
Means, no need to pay cash and is like $78+ Per person per year. Unlike many years ago it use to be like a lump sum of $10k for like 30 years; which is totally stupid for ppl will sell house and yet when you sell house it gets terminated.

For Private Mortgage Insurance, there are various Insurance Companies to shop around for competitive Mortgage Protection Insurance premium rates. There are monthly, quarterly, half-annual and annual modes to choose from. Premium is paid in cash.

Means you need to account it to your monthly expenses as it is cash payment! and the fee is dependent on like sum insured and if it is a life or a term plan. 

So after all the information and the thinking, we decided to go with HPS as I already have a life plan which have like a $300k coverage which will be enough to cover the house whole sum and all thus, we reckon that a HPS is already enough for us to cover whatever else we need for the house and we don't need more coverage and more money spend on insurance. So yup, will be going on with HPS on the day with sign the loan and get the key! 

Also get news, our, HLE was approved not long ago while i was away on a school trip in vietnam; 11/03/2014. Happy to hear the news from love while i am in vietnam. 

March is really a busy month for us as i was overseas with the school from 11 march to 14 march, whereas Stanley will be away for reservist from 17 March to 22 March!! Gosh I am all alone during the March holiday period. 

But yup work still need to be done and soon we will need to decided on more things!!