Mortgage Insurance Explained: What is it?

I believe we have all heard of Mortgage loans, but few know what a mortgage insurance is about. As the term already explains itself, a mortgage insurance, or more commonly known as Mortgage Reducing Term Assurance (MRTA), is one that insures your family members for your mortgage loan in an unfortunate event of death or total and permanent disability.

Is it necessary to get a Mortgage Insurance in Singapore?

You may think – “Huh? I just spent money on a mortgage loan, but now I need to fork out even more money for Mortgage Insurance? Do I really need it? Don’t need one lah, I not so suay one!”

Sometimes, the more you don’t wish for it to happen, the more you will jinx it.

So, just imagine an event of death or total permanent disability. Without your help, can your family service the mortgage loan themselves? Because if they can’t, your house may be taken away by the bank, leaving no roof for your entire family’ head. I believe, your heart has an answer now.

Mortgage Insurance vs Home Protection Scheme vs Term Insurance: Which is better?

If you are now convinced to get one, the next problem comes in. What type of Mortgage Insurance should you get?

All 3, be it Mortgage Insurance, Home Protection Scheme or Term Insurance, all have one thing in common. Their main purpose is to help protect members and their families against losing their flats in the event of death, terminal illness and total permanent disability while during paying off home loans.

Are they complementary of each other or substitutes? If so, which is better?

We have summarised some of key points of the 3 insurance policies, namely Mortgage Insurance, Home Protection Scheme and Term Insurance. We have also compared the Pros and Cons of the following 3 for you to make a more informed decision.

Home Protection Scheme

For all owners of HDB flats, paying off home loans using CPF Ordinary Account (OA)

Type of Insurance: Decreasing Term Insurance

Coverage Term: Up to 65 years old or until housing loan is paid up/ HDB is sold

 Pros:

Should an unfortunate event happen, the outstanding amount of your home loan would be paid by the CPF Board. "Under Government should be cheaper"

Cons:

• Only for HDB owners, paying home loans using CPF OA
• Once the specific HDB is sold, the HPS coverage will terminate

Mortgage Insurance

Compulsory for owners of HDB using CPF who applied for exemption, and Recommended for owners of condominiums and private properties

Type of Insurance: Decreasing Term Insurance

Coverage Term: At least up to 65 years old or until the housing loan is paid up

Pros:

• Greater scope that covers more properties – HDB, Condominium, and Private Properties
• Can be reused on consecutive properties
• Cheaper relative to Term Insurance

Cons:

• Decreasing Term Assurance – Sum assured reduces each year in proportion to the loan amount and loan tenure of the life assured.
  

Term Insurance

Compulsory for owners of HDB using CPF who applied for exemption, and Recommended for owners of condominiums and private properties

Type of Insurance: Level Term Insurance

Coverage Term: At the end of the term

Pros:

• Level Term – Provides levelled coverage and Sum Assured will not decrease over time
• Over a long period of time
• Can be reused on consecutive properties

Cons:

• More expensive than Mortgage Insurance

Yes, for all HDB owners paying their loans using CPF, it is compulsory for you to get either the Home Protection Scheme or a Mortgage Insurance, unfortunately or fortunately. If you are a private property owner, don’t think that you can siam having to buy a mortgage insurance just yet.

Before you start to gloat at them, it is still highly recommended to be insured because the higher price of private property poses a potential larger financial burden in an unfortunate event. Unless you have psychic’s power that you know you will not meet any unfortunate event in your life, it still better to be safe than sorry.

Best Mortgage Insurance Plans Available in Singapore

We have compiled the best Mortgage Insurance companies available in Singapore:

• OCBC Mortgage Insurance
• Tokio Marine TM Mortgage Protection
• NTUC Income Mortgage Term
• Manulife ManuProtect Decreasing
• AXA Decreasing Term Assurance
• AVIVA MyProtector Decreasing
• AIA Mortgage Reducing Term Assurance
  

Which Is The Best Mortgage Insurance Plan To Get?

Ultimately, it depends on your personal preference to determine which Mortgage Insurance Plan to get.

But the cheapest Mortgage Insurance Plan would be the one that is free. FREE?

Close your jaw.

Yes, the best and cheapest Mortgage Insurance Plan would be the OCBC Mortgage Insurance Plus/ Advantage refunds premium paid if there are no claims by the end of the policy term. So while you get the coverage, given that you do not have any claims, you get your money at the end of it, as if you did not spend it in the first place!

However, price point may not be your biggest factor as there are greater coverage offered by other companies that may suit your needs even more. You can refer to the products to find out more.

Now, you can have a peace of mind and roll the pineapple into your new house for some HUAT.

If you have questions about which Mortgage Insurance Plan to get after reading our Real User Reviews, why not ask our community of experts and experienced members at Seedly QnA? Best of all, you can even ask your questions anonymously if you're really, really shy!