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Mortgage Insurance Vs Home Insurance

Mortgage Insurance vs Home Insurance

In this blog, we will compare and contrast Mortgage Insurance vs Home Insurance to help you make an informed decision. Buying a home is one of the most significant financial decisions you will ever make. It’s a dream come true for most Singaporeans, but it’s also a long-term commitment that requires careful planning and consideration. One of the things you need to think about is insurance. While there are different types of insurance policies you can get, the two most common types for homeowners are mortgage insurance and home insurance.

 

Understanding Mortgage Insurance and Home Protection Scheme (HPS)

Mortgage insurance and Home Protection Scheme (HPS) are two types of insurance that are designed to protect homeowners in Singapore.

Mortgage Insurance and Home Protection Scheme (HPS)

  • The Home Protection Scheme (HPS) is a type of mortgage-reducing insurance that is administered by the Central Provident Fund (CPF). The HPS is only applicable to HDB owners who are using their CPF savings to pay for their monthly housing loan instalments. The cost of the HPS premium is based on the member’s age, loan amount, and loan repayment period. The HPS is designed to help CPF members pay off their outstanding housing loans in the event of death, terminal illness, or permanent disability. It covers the outstanding housing loan up to the age of 65 or until the housing loan is paid in full, whichever is earlier. The cost of HPS is affordable and is paid for by using CPF(OA) funds.
  • Mortgage insurance is a form of private insurance that protects the borrower from financial loss if the borrower unable to pay their mortgage payments due to terminal illness, death, and permanent disability. The cost of mortgage insurance is an annual premium that is payable by Cash.

To qualify for an exemption from the Home Protection Scheme (HPS), you must have adequate coverage from private insurance policies such as mortgage insurance to cover the outstanding housing loan of your HDB flat. In summary, mortgage insurance and HPS are two types of insurance that provide protection to homeowners in Singapore. While mortgage insurance protects the borrower from financial loss, HPS protects CPF members and their families from the burden of outstanding housing loans in the event of death, terminal illness or permanent incapacity.

 

Home Insurance

Home insurance, also known as homeowner’s insurance, is designed to protect the homeowner from financial loss due to damage or loss of their property.

Home Insurance

It’s a comprehensive insurance policy that covers a range of events, including fire, theft, natural disasters, and other types of damage. Home insurance also covers liability, which means that if someone is injured on your property, your insurance policy will cover their medical expenses and other damages.

In Singapore, home insurance is not mandatory, but it’s highly recommended. The cost of home insurance is based on the value of your property and the type of coverage you need. It’s important to note that not all home insurance policies are the same, and you should carefully review the policy details before you purchase a policy.

One of the advantages of home insurance is that it protects the homeowner, not just the lender. It provides peace of mind knowing that your investment is protected from unexpected events. Additionally, home insurance can be customized to meet your specific needs, so you can choose the coverage that’s right for you.

 

Comparison: Mortgage Insurance vs Home Insurance

Now that we’ve looked at mortgage insurance and home insurance separately let’s compare and contrast the two types of insurance policies.

Mortgage Insurance
Home Insurance
Protects Lender Property
Mandatory Yes (for HDB using CPF) No
Cost Based on the borrower’s age, the loan amount at the point of purchase
Based on property value and coverage options chosen
Coverage Protects lender from financial loss due to terminal illness, death, or permanent disability
Comprehensive coverage for damage to property and liability
Customizable Yes Yes
  1. Firstly, mortgage insurance only protects the lender, while home insurance protects the home. This means that if you default on your mortgage payments (due to death, terminal illness, or permanent disability), your mortgage will be covered. On the other hand, home insurance protects you from financial loss due to damage or loss of your property.
  2. Secondly, mortgage insurance is only mandatory for those who own an HDB flat and are using their CPF savings or cash to make monthly housing loan payments. Home insurance, on the other hand, is not mandatory, but it’s highly recommended.
  3. Thirdly, the cost of mortgage insurance is an annual premium based on the borrower’s age, loan amount, etc., while the cost of home insurance is based on the value of your property and the type of coverage you choose. This means that the cost of home insurance can vary based on the coverage options you select.
  4. Fourthly, mortgage insurance is a fixed amount (Term Life) or a decreasing amount (Mortgage decreasing) that is determined by the loan amount and the loan interest, while home insurance is a customizable policy that allows you to choose the coverage that’s right for you. This means that you have more control over the cost of your home insurance policy.
  5. Lastly, mortgage insurance is designed to protect the lender, while home insurance is designed to protect the property. This means that the coverage provided by these two types of insurance policies is different. Mortgage insurance only covers the lender’s financial loss due to death, terminal illness, or permanent disability, while home insurance covers a range of events, including damage to your property and liability.

 

Takeaway: The Importance of Both Mortgage Insurance vs Home Insurance

In conclusion, both mortgage insurance and home insurance serve different purposes in protecting your home and investment in Singapore.

Importance of Mortgage Insurance Home Insurance

While mortgage insurance protects the lender from financial loss due to default on mortgage payments, home insurance provides comprehensive coverage for your property and liability. It’s essential for homeowners in Singapore to understand the importance of both mortgage insurance and home insurance. By understanding the differences between these two types of insurance policies, you can make an informed decision about the type and level of coverage you need.

Contact us today to learn more about how we can help you protect your home and investment!

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