Your guide to home & mortgage insurance

If you've just got a minute:

• Home and mortgage insurance are important because they add much-needed financial protection for your home against unexpected mishaps.
• Mortgage Reducing Term Assurance (MRTA) is the most cost-efficient mortgage insurance that supplements HDB’s Home Protection Scheme (HPS).
• For wider coverage, consider Level Term Assurance (LTA) instead but it does come with higher cost (i.e. premium).

Owning a home is a whole lot of things in one. It’s an exciting life milestone and is a big, long-term financial commitment that can cost millions. Luckily, for a big-ticket purchase like your home, you can remove unnecessary and unwanted stress by making sure it is well-insured and protected.

In fact, there are various home-related and mortgage insurance for your Singapore home, with which you transfer the risk (and stress) of unexpected situations (e.g. fire) to a third party.

If you haven't gotten your home protected yet, here’s a quick primer on all the types of home-related insurance plans available.

1. HDB Fire Insurance: What does fire insurance cover?

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.

How to get fire insurance: Existing or new owners can purchase the HDB Fire Insurance policy from the HDB appointed insurer.

2. Home Contents Insurance: What does home contents insurance cover?

What is home contents insurance? Home contents insurance such as myHome Protect II 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 in Singapore: What is it, its importance, and types

Mortgage insurance is one of those home insurances 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 pays out a lump sum that can be used to offset 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 due to outstanding mortgages 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.

What types of mortgage insurance can you find in Singapore?

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 ManuProtect Decreasing (II) Insurance companies	ManuProtect Term (II) Insurance companies
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.

HDB HPS vs MRTA in Singapore: Do you need to get a new plan when you move house?

While HDB HPS (under CPF) and MRTA in Singapore might seem pretty similar, there is a key difference: HDB 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:

1. 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.
2. 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 short, the mortgage insurance cost decreases over time as your home mortgage gets paid off.

In contrast, the coverage for LTA 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, which is for those looking for a fuss-free mortgage insurance option. Here’s why:

• Customisable mortgage protection insurance plan

  The coverage amount on eDecreasingTerm 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.

  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

  Unlike other MRTA options in Singapore, existing DBS/POSB customers can apply for eDecreasingTerm online. It’s super fuss-free because the form comes pre-populated with your personal particulars.

  Joint homeowners can also get eDecreasingTerm – 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

  All you need to do is answer 3 simple questions about your health condition.

  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

  eDecreasingTerm 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 alternative.

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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.