Mortgage insurance or term life plan - what should you choose as a homeowner in Singapore?

1. Mortgage insurance or term life plan - what should you choose as a homeowner in Singapore? Buying a home is one of the biggest decisions you will probably ever make. Your home isn’t just a place you reside in; it is where you make memories that you will cherish with those you hold dear. Your home is also a huge financial responsibility. Monthly mortgages can take a huge chunk out of your income and that’s fine as long as you are actively working. But what if things go awry? You wouldn’t want your family to struggle with payments for the house. This is why mortgage insurance is so important for you as a homeowner. The coverage you get ensures that your loved ones can keep a roof over their heads if something unfortunate happens to you as the sole breadwinner.

2. Mortgage insurance in Singapore In Singapore, owners of HDB flats get coverage from Home Protection Scheme (HPS). HPS is mortgage-reducing insurance. However, HPS is not compulsory if the homeowner opts for private mortgage insurance or has life insurance. You may also be exempted from HPS if you don’t pay for your flat with your CPF funds. So, if you are exempt from HPS, what are the other options for securing your mortgage? Let’s find out.

3. Mortgage insurance and term life plan Homeowners exempted from HPS may choose between mortgage insurance and term life plans to cover their house mortgage. Owners of private housing or executive condominium properties will also have to consider opting for private mortgage insurance or term life plans to cover the loan on their property. But how does one choose between mortgage insurance and a term life plan? Let’s take a look at the meaning of each of these two forms of coverage to help us reach a decision. • Mortgage insurance – Mortgage insurance plans in Singapore are also commonly called ‘mortgage reducing term assurance’ or MRTA. MRTA covers the homeowner against death. True to the name, the coverage keeps reducing with each passing year as the mortgage itself keeps getting paid off. • Mortgage insurance plans can be purchased from insurance companies. As a homeowner, you may even opt to add a rider to your plan to extend your coverage so you get a payout even for total and permanent disability.

4. Term Life Plan – A term life insurance plan is life insurance that covers you for a fixed period that is set when you purchase your coverage. As a homeowner, you would ideally pick the term plan’s tenure in a way that it matches with the tenure of your home loan. • The term life plans given by leading insurers in Singapore generally cover you against death, total and permanent disability and terminal illness. You usually also get the option of adding riders that will cover you against certain early-stage medical illnesses that might leave you unable to work and thus, pay your home loan.

5. So, what makes a term plan’s coverage different from what you can expect from MRTA? • If you opt to secure your home loan with MRTA, the coverage you get reduces each year as your mortgage draws to a close. This is not the case with a term life plan that offers the exact same sum assured whether a claim is made in the first or last year of coverage. • Also, the payout from MRTA goes directly to the home loan financer. On the other hand, the payout from term life insurance goes to your nominee who may use the amount as they deem fit. They may use it to pay off the home loan and then keep the surplus as investment for the future. • However, with a term life plan, there is always the possibility of the homeowner getting underinsured if they select an incorrect figure of coverage or if their insurer only covers them up to a certain limit. On the other hand, MRTA is given up to the home loan amount so there is no possibility of making an error when deciding your coverage. • Some insurers are also known to offer certain discounts on private mortgage insurance plans if no claims have been made as the coverage draws to a close. Also, you may get a MRTA plan that allows you to enjoy a few premium-free years towards the end of the policy tenure if your premiums have been paid up before the coverage tenure ends.

6. One thing to keep in mind is that both MRTA and term life plans have good portability. Private mortgage insurance can be transferred between properties and your term life plan covers you, not your home. This means that if you decide to change homes, your coverage can work for the new place as well. This kind of portability does not exist with HPS. In conclusion As we can see, MRTA plans and term life insurance each have their own advantages. The choice between the two really depends on what benefits work best for you. Do make sure to go over all available insurance options with a financial consultant before choosing the plan that works the best for you. Good luck!

7. You can also find more interesting details on the site below: Website: https://www.prudential.com.sg Facebook: https://www.facebook.com/PrudentialSingapore/ Instagram: https://www.instagram.com/prudentialsingapore/?hl=en LinkedIn: https://www.linkedin.com/company/prudential-assurance-company-singapore/ You Tube: https://www.youtube.com/channel/UCWs_Qg2Rahok4kORir5w4eQ