Previously I wrote about the case in which a lorry driver Jason Lim Wei Kwan drowned when the lorry he was in slid off a barge and sank into the sea off Pasir Panjang Terminal. As I suspect they had applied for a BTO but now having difficulty paying the remaining balance due to the Home Protection Scheme only taking affect after collection of keys, I decided to write to Straits Times. The following letter was published on 8 October 2014:
Home Protection Scheme - Start coverage once payment is made
THE Home Protection Scheme is a compulsory mortgage insurance scheme for those using their Central Provident Fund savings to pay for the mortgage instalments of their HDB flats.
One of the problems with it is that coverage does not start when one signs the Agreement for Lease for a new HDB flat; it starts only after the collection of keys.
Buyers are already committed to the purchase of the flat by paying a down payment when they sign the Agreement for Lease. However, prior to the collection of keys, should one of the buyers die or suffer from permanent incapacitation, there is no insurance coverage.
Can the authorities consider starting the coverage as soon as the first down payment is made?
Also, would the HDB refund the down payment on compassionate grounds when the purchase is foiled by unfortunate events such as death or permanent incapacitation?
Wilfred Ling
This was CPF and HDB's reply on 16 October 2014:
Home Protection Scheme: Why cover starts upon collection of keys
WE THANK Mr Wilfred Ling for his feedback ("Home Protection Scheme: Start coverage once payment is made"; Oct 8).
The Home Protection Scheme (HPS) is a mortgage-reducing insurance administered by the Central Provident Fund Board that aims to help CPF members settle their outstanding housing loans for HDB flats in the event of death or permanent incapacity.
HPS cover will commence when a member has become the legal owner of his HDB flat upon collection of the keys, and this is about the same time as the commencement of his housing loan.
At this point, flat buyers would have finalised the housing loan quantum, loan repayment period and share of repayment among the co-owners.
The HPS sum assured and coverage period can then be determined based on these parameters. This helps to ensure that members have the appropriate level of financial protection and do not pay excessive premiums using their CPF savings.
Members looking for earlier financial protection can consider alternative private mortgage or term insurance policies.
A forfeiture of 5 per cent of the price of the flat will apply when new flat buyers cancel their application after signing the Agreement for Lease. This is to deter frivolous applications and to protect the interests of serious buyers.
Nonetheless, the HDB is mindful that there could be situations that merit special consideration.
The HDB will look into the circumstances of each case and consider the best way to help buyers, including waiving the forfeiture for those facing extenuating circumstances.
We will take Mr Ling's feedback into consideration in future reviews of the HPS.
Irene Kang (Ms)
Director of Communications
Central Provident Fund Board
Loh Swee Heng
Director (Sales)
Housing & Development Board
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My ifa advise me take up a private mrta although my BTO is completed in 3 years time. I have already started paying for the mrta now.
In this case, your ifa need (to earn $$$) and your need (to have mortgage protection) just nice coincide.
Once you collect your HDB key, you can cancel your MRTA and rely on HPS, as the HPS premium is much cheaper.
Unless you want to hang on to the MRTA as spare additional insurance.