The most significant big-ticket item for my family in 2016 was the purchase of our Executive Condominium (EC), The Terrace, at Punggol Waterway. Like many Singaporeans, being able to upgrade to an EC is our Singapore Dream. Arising from this purchase, we had taken a quite a big mortgage loan from one of the local banks and in the course of doing so, I did some research on mortgage loans. In this article, I will share some of my knowledge on CPF’s Home Protection Scheme (HPS).
More than 80% of Singapore residents live in HDB flats. If you are using your CPF savings to pay your monthly housing loan instalments on your HDB flats, you are required to be insured under HPS. Note that HPS does not cover private residential properties, such as executive condominiums (ECs) or privatised Housing and Urban Development Company (HUDC) flats. Because of this exclusion clause, my family is not eligible for HPS cover.
For the current HDB flat that my family is living in, it is covered under the HPS although the loan is from a commercial bank. As our loan amount is only $150,000, the annual premiums is very affordable and can be deducted from my CPF Ordinary Account.
When buying insurance, you must pay attention to the exclusion clauses because these term and conditions may affect your insurance claims. Members will not be able to claim under HPS if the following events occur within the first policy year of the cover:
1) they committed self-inflicted injury or suicide, or
2) they committed a criminal offence punishable by death, or
3) the claim arose out of their own intentional criminal act.
Members will also not be able to claim under HPS if
1) they were not in good health before the commencement of HPS cover, or
2) they provided false or misleading information, or
3) the claim arose from wars or any warlike operations or participation in any riot
While I can fully agree that applicants should declare their health condition truthfully before applying for HPS cover, the exclusion clause on participation in any warlike operations is really puzzling to me.
I may be wrong (because I am not legally trained) but it seems that our National Service (NS) men may not be able to make HPS claims if they were fatally or seriously injured in the course of defending the nation in wartime or even during battlefield training? Perhaps CPF Board may want to clarify this point because we have so many conscripted and career soldiers protecting the nation and it would not be fair to exclude their claims on the basis of the nature of their job.
My wealth protection strategy
As you can see from above, HPS protects members and their families against losing their HDB flat in the event of death, terminal illness or total permanent disability. Thus, it is a form of wealth protection and is a necessary evil. Readers of this blog must have the correct mindset when it comes to buying insurance.
Some people feel that buying insurance is a waste of money and some view it as a form of investment. To me, insurance is akin to buying a shield to protect my family. I cannot predict what the future holds for me and my dependents. But I can certainly take actions to mitigate the risks of future financial pitfalls that may occur in my wealth journey.
As I will be upgrading to my EC soon and will be taking on a much larger housing loan, my family had been looking at various mortgage offers in the market. This is because HPS does not provide insurance coverage for EC. Eventually, we decided against buying any mortgage insurances but instead enhance the existing coverage for my Aviva MINDEF Group Term Life policy, which replaced the SAF Group Insurance with effect 1 October 2016. Incidentally, the change coincided with our plan to source for a cost-effective mortgage insurance.
The most amazing thing about Aviva MINDEF Group Term Life policy is that it is so much cheaper and the maximum length of coverage is till 70 years old. Because of this, I enhanced my coverage by 100%. Guess what? The premiums is 50% lesser than my previous coverage! Furthermore, unlike HPS, this scheme covers me during war and terrorism. My Avivia plan includes Group Term Life Policy, Personal Accident Policy and Living Care Policy.
I plan to upgrade my Aviva Living Care Policy to Aviva Living Care Plus Policy in a few years time before I reach 40 years old. The latter will offer protection against early critical illnesses such as cancer and heart diseases. The main drawback is the benefit is only payable only for one early critical illness. So if a person suffered from multiple early critical illnesses, he is able to claim for only one.
The thing about most Term Life policies is the coverage ceases once the full sum insured has been paid out and the insured person is not entitled to any further claim. There may be products out there that circumvent this but it may be prudent to buy more than one Term Life policy to provide coverage against potential multiple health disasters.
Taking good care of our health is one thing. Another pragmatic approach would be to review your financial status and ensure adequate financial protection for your family. During this festive season, spend some time to review your wealth journey for this year and adjust your strategy accordingly.
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SG Wealth Builder