Despite having been writing for over 4 years now, there are still so many aspects of personal finance that Heartland Boy hardly pays notice or is simply ignorant of. Well, one of the benefits of being plugged into the personal finance community is the opportunity to plug the gap by learning from fellow bloggers. A recent article from Investment Stab on the CPF Home Protection Scheme (‘HPS’) inspired Heartland Boy to review his own HPS. After further online research and a quick discussion with his financial advisor, he successfully applied to be exempted from the CPF Home Protection Scheme.
What Is the Home Protection Scheme (‘HPS’)?
The Home Protection Scheme is a mortgage-reducing insurance that protects members and their families against losing their HDB flat in the event of death, terminal illness or total permanent disability. (Source: CPF) Should any of these events occur to the life assured, the payout from HPS would be used to pay off the remaining mortgage, ensuring that the surviving tenant need not worry about meeting this obligation anymore.
HPS insures CPF members up to age 65 or until the housing loans are paid up, whichever is earlier. If CPF savings are used to pay for monthly housing loan instalments on your HDB flat, it is required for the home owner to purchase HPS. However, home owners can apply for HPS exemption if they already have one or more insurance policies (eg: whole life/ term life etc) that can cover the outstanding housing loan up to the full loan term or 65 years old, whichever is earlier. This last piece of information only came to Heartland Boy’s knowledge after he did more due diligence.
Finally, do not confuse HPS with a Home Content Insurance Policy.
Why I Apply To Be Exempted From CPF HPS
During your HDB key collection date, one would be contemplating about a multitude of to-do tasks while also juggling a myriad of emotions. Even the ever so meticulous Heartland Boy did not pay much attention to the HPS and simply assumed that it was compulsory. As aforementioned, it was only a fellow blogger’s article that spurred him to do more research online that convinced him to apply to be exempt from the CPF HPS.
1. HPS Is Not Value For Money
For the reasons cited in this article, Heartland Boy and Heartland Girl collectively decided to opt for a $283K HDB loan for a tenure of 14 years. To protect against this sum assured, the Heartland Couple was paying a combined premium of $306 for a total of 12 years (90% of HPS Cover period) under the Home Protection Scheme. Note: Heartland Boy subsequently took advantage of the low interest-rate environment as a result of Covid-19 to refinance into a very cheap home loan. Obtain the cheapest mortgage package from PropertyGuru Finance.
Take note of the formula used to calculate the payout of the Home Protection Scheme during the term should any of the events occur to the life assured. As the HPS is a mortgage reducing term insurance, the Sum Assured reduces with each month the life assured pays the mortgage.
During the discussion with his financial advisor, he informed Heartland Boy that the prices of term insurance have been drastically reduced several years ago that make them much more compelling than a mortgage reducing term insurance. True enough, when Heartland Boy went to obtain quick online quotes for a term-life policy from some of the insurance providers in Singapore, a lesser premium payable would have already insured both tenants for a total of 20 years for a fixed sum of $280K! This means protection for a longer period, for a larger amount (since sum assured does not decrease overtime) at a lower cost! Furthermore, the payout arising from a term life insurance policy is more flexible in its use compared to the HPS since HPS claims can only be used for paying the outstanding mortgage, with the excess (if any) deposited into the insured member’s Ordinary Account.
2. Possible case of being over-insured
Shortly after Olympia was born, Heartland Boy did a comprehensive review with his insurance agent on the various insurance policies for his child and family. During the assessment, they already accounted for the mortgage of the house as a recurring liability. Therefore, given that Heartland Boy was opted into the HPS when he took his HDB loan, it gave rise to a possible case of over-insurance where coverage became excessive. After weighing the pros and cons, Heartland Boy thinks that it is wiser for his family to save on the annual HPS premium and redirect it to other purposes instead.
How To Apply Online To Be Exempted From CPF HPS?
After overpaying for almost a year, the good news is that it is a relatively straightforward process to apply online to be exempted from the CPF Home Protection Scheme. Here is the step-by-step procedure on how to do it.
1. Login to your account on CPF webiste via SingPass
2. Under My Requests, look for Home Protection Scheme and subsequently, Apply To Be Exempted From HPS
3. Key in your property address, select 100% exemption and your Spouse CPF number
4. Provide the policy providers and policy numbers of your existing insurance policies (eg: term, whole life, endowment, mortgage reducing term assurance). This is where it pays to have such information collated so that it can be easily retrieved.
5. Once you are done with the following steps, repeat the same steps for your joint tenants (likely to be your spouse) if it is held under joint tenancy.
6. Several business days later, you should be receiving good news from CPF as shown in Diagram 3.
The premium that you have paid earlier would also be refunded into your CPF OA on a pro-rata basis. It was very efficient as Heartland Boy’s refund was credited the very next day.
Yes, there’s also news of the government giving premium rebates for CPF members under the Home Protection Scheme. Heartland Boy likes to reiterate that it isn’t obligatory from CPF to do so, it isn’t guaranteed and the most recent occurrences were in 2015 and 2006.
For those who would like to know how much they have been paying on their HPS, simply examine the transactions in your CPF Ordinary Account or have it estimated using the CPF HPS premium calculator.
Disclaimer: Heartland Boy is not a licensed financial advisor. Please speak to a qualified certified financial planner to evaluate your own insurance needs.
Hi HLB, what if I am paying my vank loan instead of HDB. Can I opt out as well?
Yes, you can. The qualifying conditions are based on having sufficient existing term/life/endowment insurance that would cover the housing loan up to its full term or 65 yo, whichever is earlier.
Does the premium go down as the the loan amount decreases?
It doesnt. Premium payable is constant annually while the sum assured decreases.
I am quite surprised that the HPS is more ex compared to other term insurance. I thought HPS is non profit making and there are minimal distribution cost if any. Just to mention, the rebate could be quite substantial. I received an rebate amounting to 2 or 3 years worth of premiums and I had only been paying for 5 years.
I like to check with you if there is any source online to indicate that HPS is not for profit?
Rick Cheong says
I do received a $3k plus HPR this month where my yearly premium is $472. The last rebate was in year 2015 for an amount which I think is lower compared to the recent one if I remembered correctly.
Although it is not obligated for CPF to do a premium rebate, by using known rebate credited to my CPF, the premium paid is lower compared to a private insurer.
If you pay $472 per annum, you would have paid a maximum of $2.8K since the last premium rebate in 2015. If you receive 3K+ as rebate in Jan 2020, that means you made a profit?
Seriously, HLB, where did you get the boldness to advise exemption from HPS and tell people to go for private term insurance without providing the “Sum assured per premium dollars” between the 2 protection? Without proof of the benefits and advising against ‘over insuring’ is a serious offense under MAS guideline of giving financial advise without the proper licensing and training.
Suggest you relook at your article and receive professional advise from a Certified Financial Planner on this issue of HPS.
Thanks for your feedback. I was merely writing about my own experience and evaluating the pros and cons.
Nevertheless, I will add a disclaimer to my article.
To be honest, worrying about paying your hdb is the last thing you want when your partner dies. I’m telling this from personal experience. If it’s only 200+ per annum, i would gladly pay for it
Hi thanks for sharing your experience. Sorry to hear about your loss
Thanks Heartland boy. Went to apply on 19 Jan and still no reply till. Say minus weekends and PH, it’s already 8 business days! CPF ppl must be still in post-CNY mood!
You are welcome, be a bit more patient, perhaps it could be the insurance policies that you provided which required more verification?
Chong Hao says
I could not find any information online stating that it is non profit. But the scheme is administered by CPF board, and there are no insurers appointed (unlike Dependent Protection Scheme), so there are no private players. CPF board collect premiums and distribute it out. Government agencies in general do not make money through this manner.
Megan Lee says
Hi HLB, thanks for the article! Any idea if they will prorate previous years’ payments of premiums? Have been paying since 2017 but just learnt about this!
Yes, I received a pro-rata refund when I applied to be exempted mid-way through
Marcus Wong says
Hi HLB, if i apply the exemption for HPS before applying the HPS cover, do i still need to apply for HPS so i can start using CPF for monthly repayment of my bank loan upon HDB completion?
I am not sure if i understood your question correctly. If you want to use CPF, you need to show either a HPS exemption or HPS cover.
Johan Yu says
Looks like only good to stop HPS when you already > 50% of the loan term, because your loan amount is much smaller, while the premium stay the same