Sunday, 8 November 2015

Getting to know: Home Protection Scheme (HPS)

The Home Protection Scheme (HPS) is a mortgage-reducing term insurance which covers an individual’s liabilities on home loans in the event of death or permanent disability. Its premiums are affordable and is a government initiative. For every $100,000 coverage under HPS, the annual premium is about $76; that is cheaper than most term insurance.

Eligibility

Currently home owners making HDB loan repayments through CPF-OA have to be enrolled into HPS. Exemptions from HPS is allowed if one shows proof of other forms of insurance coverage. However, in my opinion, the HPS is the most affordable plan and it is difficult to find a similar plan at a lower dollar to coverage rate. It is good too for HDB owners servicing their home loan through a bank to consider the HPS.

Why it is important to learn about HPS

Often, financial planners may unwittingly advise to obtain more coverage (through whole life plans) on the pretext that you are now a home owner with a housing liability (home loan). As many may not be aware that they are covered under HPS, as the funding of premiums is through CPF savings, they may land up in a situation of being double covered - under HPS and a more expensive insurance plan recommended by the adviser. Hence knowing if you are covered under HPS reduces your insurance expense.

To summarise, the HPS covers an individual’s home liability loan. You have to be insured under HPS if the servicing of your housing loan is through CPF-OA, following this reasoning, one can safely presume many new HDB owners are in fact covered by HPS (I wonder how many are aware of this). Furthermore, HPS is one of the best dollar for coverage term insurance, being priced at approx. $76 per $100,000 coverage.

For majority of Singaporeans, it is important to be aware if we are covered by HPS before embarking on insurance planning. It ensures optimal planning and prevent us from falling prey to purchase seemingly more expensive private insurance. To know if you are covered under HPS, do check your CPF statements to see if an annual HPS premium is deducted from your CPF savings. Alternatively, feel free to email CPF to make an inquiry.

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