Buying a home is a huge milestone. It is also an extremely enormous financial responsibility. You need to not only make sure your mortgage payments go out on time but also secure mortgage insurance, as protection against the unforeseen.
Now, if you are an HDB flat owner using your CPF to pay for your home loan, you compulsorily need to have HPS. HPS stands for Home Protection Scheme – a mortgage reducing insurance that protects your home in case you suddenly pass away or are left incapacitated to pay your housing loan debt.
However, if you opt in for private mortgage insurance, you may apply to be exempted from HPS.
Wondering if that’s the way you should go?
In this article, we will help you decide by enumerating the advantages of having private mortgage insurance. Let’s take a look –
- Joint life coverage
One of the biggest advantages of private mortgage insurance is that homeowners may purchase joint-life coverage together under the same plan. If a claim is raised, the survivor gets the payout. With HPS, you have to purchase independent plans.
If you have plans of upgrading your home in a couple of years, HPS might not be suitable for you. This is because HPS is linked to the property it covers; you cannot port the coverage to another flat. You will have to take out a new HPS for your new home at a possibly higher premium. On the other hand, a lot of private mortgage insurance plans have portability. You are allowed to transfer coverage for your mortgage over to a new property without too much hassle.
- Direct payout
In the event of a claim, the HPS payout goes directly to HBD or the mortgage lender, as the case may be. On the other hand, a private mortgage insurance payout goes into the hands of the nominee who may then use the funds as they deem fit. They would definitely have to put the required amount towards the mortgage, post which they may use the surplus funds to run their home and provide for the family.
- Beneficial riders
One of the main advantages of private mortgage insurance plans is that these plans also give you the option of riders that can waive your premiums in case you are diagnosed with certain early/intermediate stage medical conditions or critical illnesses. This can indeed provide huge financial relief to you and your family during a health crisis. HPS does not offer you the option to purchase this rider and so, if it is something you seek, private insurance might be the right choice for you.
You may now wonder, which is cheaper – HPS or private mortgage insurance?
While the premium price isn’t everything, it does have an impact on your ability to keep your coverage going. You will be glad to know that there is hardly any price difference between HPS premiums and the premiums that you would have to pay for private mortgage insurance. You can compare various options of private mortgage insurance plans and choose the one that suits your budget the best.
We hope that this article will help you make the right decision on getting mortgage insurance for your home loan. Good luck!