How does mortgage insurance work in Singapore?

If you own a home in Singapore or plan to buy one, you will eventually run into a policy question that does not feel like a banking decision at all. It feels like a family decision. Who pays the mortgage if something happens to the person who brings home most of the income. Mortgage insurance is designed to answer that question before a crisis. It pays off some or all of your outstanding home loan when the insured owner dies, is diagnosed with a terminal illness, or suffers total and permanent disability. The structure is simple in concept but different paths exist depending on whether your flat is an HDB property and whether you are paying your monthly instalments with CPF. Understanding those paths is the difference between buying cover that fits and paying for cover that overlaps.

At the center of public housing sits the Home Protection Scheme. HPS is a mortgage reducing insurance plan administered by the CPF Board for HDB flats. If you use CPF savings to service an HDB loan, you must be insured under HPS unless you have an approved equivalent policy. HPS is not life insurance in the usual investment sense. It is a pure protection policy that tracks your outstanding mortgage, and it is meant to disappear when the loan disappears. If you fully redeem the loan, the cover ends. If you sell the flat, the cover ends. If the loan term shortens because you increase repayment, the sum assured adjusts downward.

The way HPS coverage is set is straightforward. The sum assured is calibrated to the unpaid housing loan, the share of responsibility you choose for each co-owner, and the remaining loan term. In a two owner household you can split coverage in various ways. Many families choose a one hundred percent plus one hundred percent approach because each owner is insured for the entire outstanding loan. If either owner dies or suffers a covered condition, HPS pays off the remainder and the surviving owner keeps the home without mortgage. Others choose a fifty fifty split to reduce premiums. That approach lowers cost but increases risk because a claim on one owner clears only that share. The surviving owner must still service the remaining share. There is no single correct answer. The right share mirrors your real income dependency and the resilience of the household budget.

Premiums under HPS are paid annually from your CPF Ordinary Account by default. If your OA cannot cover the premium, you can pay cash or you risk a lapse. Premiums are front loaded in the sense that they are calculated with reference to age, sum assured, and term at the point of entry, and are paid yearly until you turn sixty five or until the loan is cleared, whichever is earlier. Because HPS is mortgage reducing, the sum assured falls as you pay down principal. Yet the annual premium does not step down with each year the way a private yearly renewable policy might. This is not an error. It is the design of level annual premiums that pre fund the decreasing risk over the chosen term. If you refinance the loan or change its term, you have to notify the CPF Board so that coverage can be re assessed and kept in line with the new mortgage profile.

Eligibility and exclusions are not an afterthought. HPS requires a health declaration, and in some cases medical examinations. Pre existing conditions can lead to exclusions or a rejection. This surprises some buyers who assume public scheme means automatic acceptance. It does not. If you are declined, you will need to use private market cover if you still want protection. You can also apply for an HPS exemption if you already own private policies that meet or exceed the HPS coverage requirement. The CPF Board assesses private cover based on policy type, sum assured, term, and whether benefits are paid on death, terminal illness, or total and permanent disability. If approved, you do not pay HPS premiums. You remain responsible for keeping the private policy in force. If that private policy lapses, you must reinstate HPS or find replacement cover.

HDB owners who do not use CPF for monthly instalments are not required to join HPS. Yet many households still choose mortgage protection because it solves a very practical risk. A mortgage is a fixed obligation. Income is not. For bank financed HDB flats, HPS still applies when CPF is used for instalments. For executive condominiums and private properties, HPS does not apply at all. That is where the private market steps in with two common templates. Mortgage Reducing Term Assurance, also called MRTA or decreasing term insurance, and Mortgage Level Term Assurance, often called MLTA or level term insurance.

MRTA mirrors the logic of HPS. The sum assured falls over time in line with an amortisation schedule. The premium is fixed at the start for the entire term. Because the insurer expects to pay out on a smaller sum as the years pass, the premium is generally lower than a level term plan for the same initial face value. MRTA works for a primary goal of clearing the debt and nothing more. MLTA keeps the sum assured level throughout the term. Premiums are higher because the insurer carries the same potential payout even late in the term. People pick MLTA when they want the mortgage cleared and a residual lump sum to support dependents or to buffer estate costs. MLTA can also be paired with a shorter term than the loan if you expect rising savings capacity over time, but want strong cover during the first decade when the mortgage is heavy and children are younger.

Private plans often allow you to add riders. A critical illness rider pays out on major illnesses as defined by the policy even if you survive. Total and permanent disability cover is usually embedded but definitions vary. Some policies offer waiver of premium if you become disabled so that the cover continues without payment. These features add cost. They can be sensible if you lack stand alone critical illness or disability income cover and you want a simple bundle. A financial planner will often prefer that large illness and income protection sit in dedicated policies that follow your life, not your loan, but there are households that need one policy to do several jobs during a tight cash flow period. It is not ideal. It can still be pragmatic.

Bank lenders in Singapore do not require MRTA or MLTA as a blanket rule, but they do require fire insurance that names the bank as mortgagee. Fire insurance is a separate product. It covers the building structure against specified perils. It does not clear your mortgage if you pass away. For HDB flats financed with an HDB loan, HDB’s fire insurance scheme is compulsory and you buy it from the appointed insurer for a fixed coverage period, renewing on schedule. For private property, your bank will ask for a fire policy or a comprehensive home policy, and developers or management corporations may have master policies that coordinate structural cover. Mortgagee Interest Policies exist to protect the bank’s financial interest if a separate home policy fails to respond, but these are not personal protection. A buyer should not mistake property policies for life or disability cover. They solve different risks.

Claims mechanics matter because families need realism about what happens when the worst happens. Under HPS, the CPF Board assesses a claim when a member dies or is certified with a terminal illness or total and permanent disability as defined. If approved, the outstanding loan is paid up to the insured share, and any excess cover does not become a cash benefit. The aim is to extinguish debt. For private MRTA and MLTA, the insurer pays the sum assured to the policy owner or to the assignee if the policy is assigned to the bank. Assignment is common when the bank wants legal access to proceeds to redeem the loan. If you did not assign the policy, you or your estate receives the benefit and then must redeem the loan. This sounds like a small administrative choice. It is actually a legal choice. Assigning the policy gives the lender first rights and ensures direct redemption. Not assigning leaves more flexibility but demands discipline from survivors at a difficult time.

So how do you right size mortgage insurance for your situation. Start with the property type and the loan. If you are buying an HDB flat and you will use CPF OA to pay the instalments, assume HPS unless you have strong reasons and an approved private policy to replace it. HPS is plain, it does what it says, and it keeps the decision clean for joint owners through share allocation. Set shares in line with genuine income dependency, not in line with ego or the desire to split things evenly. Some couples will protect one hundred percent each because either income could sustain the home on its own and both want certainty. Others who rely mainly on a single income can still choose one hundred percent on the primary earner and a smaller share for the other owner to reflect contributions. There is no award for symmetry. There is only clarity about who carries the risk.

If you own a private condo or landed home, or an executive condominium past its minimum occupation period, look at MRTA for a cost efficient match to the loan, and add separate life and disability income insurance that follows you across homes and jobs. If you prefer a simple all in approach during high dependency years, an MLTA for the mortgage amount plus a small additional buffer can give both debt clearance and some liquidity. Review the need to assign the policy to the bank once your loan falls to a small fraction of the sum assured. You can sometimes unassign and keep the cover for family protection without locking it to the mortgagee. The legal process takes paperwork and the bank’s consent.

It is also important to place mortgage insurance in the context of other national schemes. If your family depends on your CPF for more than the mortgage, remember that death benefits from CPF savings are distributed according to your CPF nomination. They do not flow automatically to the surviving joint owner for mortgage redemption. HPS does that job only for HDB loans and only up to the insured share. If you hold private policies, you can use beneficiary designations or trust arrangements to guide proceeds. This is not a matter for the last month of a loan tenure. It should be part of your home purchase planning conversation.

Common misunderstandings repeat in many households. The first is the belief that HPS creates savings or maturity value. It does not. If you never claim, you do not receive money back. The second is the notion that you can pause cover while you are healthy and restart later. Insurance is designed around uncertainty. Pausing breaks the model and can leave you uninsurable if your health changes. The third is the idea that a large group life policy at work removes the need for mortgage cover. Group policies are helpful but they are not guaranteed to renew if you change jobs or if the employer changes insurers and benefits. A mortgage is a long obligation. Corporate benefits are short horizon.

If you are refinancing, treat your insurance as part of the package, not an afterthought. Refinancing may lower your monthly instalment, but it can extend the loan term and increase the duration of risk for your family. If you change from an HDB loan to a bank loan and will still use CPF OA to pay, confirm your HPS status and update the details. If you switch from CPF to cash for instalments, you may not be required to remain on HPS, but the risk does not vanish simply because the premium rule changes. Only the obligation to buy a specific scheme changes. The mortgage remains, and the family still needs a plan.

Some readers ask whether mortgage insurance duplicates life insurance that is already in place. The honest answer is that it can and sometimes it should. A well sized life policy that covers income replacement can be used to redeem a mortgage and still leave funds for dependents. That approach is elegant if you have planned it deliberately, know the payout amounts, and have agreements with your spouse about priorities in a claim. Many families do not plan with that clarity. A dedicated mortgage policy creates a clear, non negotiable instruction for debt clearance and leaves other policies to serve living costs and education goals. It is a design choice. What matters is that you choose on purpose.

Now circle back to the first question. How does mortgage insurance work in Singapore. It works as a set of tools rather than a single product. HPS covers HDB owners who use CPF. Private MRTA and MLTA cover bank borrowers and private properties. Fire insurance covers the structure, not the people. Assignments determine where the claim proceeds go first. Shares determine how joint ownership translates into protection. Exemptions allow flexibility but require discipline to maintain private cover. None of these choices are about beating the system. They are about aligning protection with the way your family lives and pays for a home.

If you are buying your first flat, start with the policy you are required to have, then decide whether you need more. If you are a private property owner, map your loan, your dependents, and your existing life and disability cover before you add a mortgage policy. If you are refinancing, treat insurance updates as part of the same appointment. If you are recovering from a health event, review nominations and assignments so that any claim pays the right party without delay. This is not a market timing decision. It is a household stability decision.

Mortgage insurance is planning, not a purchase. Start with the property you have and the loan you carry. Match the cover to the risk that would destabilise your family the most. Keep the paperwork simple and current. The smartest plans are quiet and consistent.