Your guide to home & mortgage insurance
Owning a home is a big and long-term financial commitment. To reduce the stress that comes with it, here are three home-related insurance for your consideration.
1. HDB Fire insurance
HDB Fire Insurance is one of the most basic home insurance coverage in the market. It is also compulsory if you took out a HDB loan for your HDB flat.
What’s covered: Cost of reinstating damaged things such as walls, pipes, ceiling and door in the unfortunate event of a fire. In short, HDB Fire insurance covers only the things that came together with your flat when HDB first delivered the home to you.
Not covered: Home contents such as the renovation and furniture that you have carefully picked for your home, even if they were damaged by fire.
2. Home Contents Insurance
Home contents insurance such as myHome Protect complements HDB Fire Insurance, as it covers what’s in your home. Think about the amount you spent on your electronics and renovations! Without home contents insurance, a huge sum of what you have invested in your home is not protected.
What’s covered: Loss or damages to your home contents and renovations in events such as fire, bursting of water tanks or pipes, vandalism, even theft or burglary among other things.
It even covers the cost of alternative accommodation while your home is getting restored.
Some of the stranger things you can claim for: Replacing frozen food that has gone bad. If a break in occurred at your home and your keys and locks were stolen or damaged, you can also claim for the cost of replacing your locks and keys.
3. Mortgage Insurance
Mortgage insurance is one of those home insurance that homeowners think less about. What is it, and why do so few people talk about it compared to fire and home contents insurance?
What Is Mortgage Insurance?
Mortgage insurance offers a lump sum that can be used to pay off the outstanding home loan in the event of the insured’s death, terminal illness and/or permanent disability. This protects homeowners and their family from losing their home should any mishap happen.
Why Is Mortgage Insurance Important?
A home is more than just a living space. It’s a place to create precious memories with your family, and a refuge for the day’s rest. That’s why so many of us devote time, money and effort to build an environment that fits us.
Mortgage insurance protects this for your family, when life throws curve balls at you.
For instance, an unexpected mishap might mean that your family will have to take over from you the duty of paying the outstanding mortgage. This can add to the family’s financial burden, especially as mortgage is usually a huge financial commitment.
Do note that if the family is unable to continue servicing the loan, the home might potentially be foreclosed.
To avoid any undesirable situation, do consider getting adequate mortgage insurance to ensure that the family is financially protected, regardless of what happens.
Just like how life insurance protects your loved ones, getting mortgage insurance is also important to protect the home and family that you love.
Types of Mortgage Insurance
There are a few types of mortgage insurance to choose from. Each comes with its own set of features and conditions.
|
|
Home Protection Scheme (HPS) |
Mortgage Reducing Term Assurance (MRTA) |
Level Term Assurance (LTA) |
|
Where Can You Get It? |
Apply through myCPF Online Services before withdrawing CPF savings for HDB loan or bank loan |
eDecreasingTerm (eDT) |
ManuProtect Term (II)
|
|
Covers HDB Properties? |
Yes. Note: This is compulsory if you are using CPF savings to pay off your HDB loan + if you do not have any of the following insurance policy: Whole Life, Term Life, Endowments, Life Riders (attached to a basic policy), MRTA, Decreasing Term Rider |
Yes |
Yes |
|
Covers Private Residential Properties? |
No |
Yes |
Yes |
|
Coverage Amount |
Decreases with outstanding HDB loan or bank loan |
Decreases with outstanding HDB loan or bank loan |
Constant throughout coverage duration |
|
Premiums |
Affordable, since coverage decreases with time |
Affordable, since coverage decreases with time |
Relatively higher, since the coverage amount does not decrease with time |
|
Flexibility of payout in the unfortunate event of death or Terminal Illness (TI) |
The outstanding housing loan, up to the insured sum, will be settled with HDB or the mortgagee directly. |
A lump sum payout will be provided to the nominated beneficiaries by the insurer. |
A lump sum payout will be provided to the nominated beneficiaries by the insurer. |
HPS vs MRTA: Do you need to get a new plan when you move house?
While HPS and MRTA might seem pretty similar, there is a key difference: HPS plans are tied to the property whereas MRTA plans are tied to the policyholder.
This means that with MRTA, your existing plan continues to cover you, even if you sell your property and buy a new one. But with HPS, you will need to get a new HPS if you buy a new home.
There are two perks to getting an MRTA over HPS:
- You won’t have to purchase a new mortgage insurance, or be subjected to another round of medical underwriting if you move into a new home. This is useful because our health can change with time. Being diagnosed with new health conditions during medical underwriting might mean settling for a plan that excludes your pre-existing health conditions.
- You won’t be subjected to higher premiums. Since premiums increase with age, getting a new mortgage insurance means paying more, because you are now older and wiser. With an MRTA, this wouldn’t be an issue as the plan is transferrable to cover your new house.
MRTA vs LTA: Is your focus on affordability or coverage?
The difference between MRTA and LTA is defined by the choice between affordability and coverage.
MRTA was designed with decreasing coverage amount over time to correspond with your mortgage commitment. Over time, as you repay your mortgage, you will need less coverage from your mortgage insurance. The decreasing coverage feature helps homeowners pay for only what you’d need to be financially protected against your mortgage.
In contrast, the coverage for MLTA remains at the same level throughout the plan. Even as your mortgage gets repaid over time, coverage on the LTA does not decrease.
As such, MRTA is usually accompanied with lower premium that are much more affordable compared to LTA.
When to consider eDecreasingTerm
An example of MRTA is eDecreasingTerm (eDT), which is for those looking for fuss-free mortgage insurance options. Here’s why:
- Customisable plan
1. The coverage amount on eDT is customisable for your outstanding mortgage amount, policy term and choice of interest rate (between 1% to 5% to match your loan package interest rate). This gives you the flexibility to choose your coverage amount so that you won’t be over or under-insured.
2. If you require more complex (or higher) coverage, an alternative is ManuProtect Decreasing (II) that you can apply for via DBS TeleAdvisory/POSB TeleAdvisory.
- Hassle-free online application
1. Unlike other MRTA options in the market, existing DBS/POSB customers can apply for eDT online. It’s super fuss-free because the form comes pre-populated with your personal particulars.
2. Joint homeowners can also get eDT – just remember to make your own separate applications! If any of this sounds confusing, our DBS/POSB TeleAdvisory team will be happy to help.
- No health check-ups required
1. All you need to do is answer 3 simple questions about your health condition.
2. In contrast, similar MRTA plans would require you to speak with a financial advisor first before you can make the purchase. You might even have to go through full medical underwriting.
- Plain Vanilla Coverage
1. eDT is a no-frills MRTA plan. It offers plain vanilla coverage on your mortgage with embedded Terminal Illness (TI) and Total and Permanent Disability (TPD) riders. However, you cannot add other riders such as critical illness coverage. If you’d prefer accelerated coverage upon the diagnosis of a critical illness, ManuProtect Decreasing (II) is one option.
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Disclaimers and Important Notice
This article is meant for information only and should not be relied upon as financial advice. Before making any decision to buy, sell or hold any investment or insurance product, you should seek advice from a financial adviser regarding its suitability.
All investments come with risks and you can lose money on your investment. Invest only if you understand and can monitor your investment. Diversify your investments and avoid investing a large portion of your money in a single product issuer.
Disclaimer for Investment and Life Insurance Products
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