Mortgage Reducing Term Assurance (MRTA): The Home Protection Scheme (HPS) Exemption

A look at Mortgage Reducing Term Assurance (MRTA) as a product in place of Home Protection Scheme (HPS) and the additional advantages it offers.

Fundsupermart May 03, 2016 31940

According to the Department of Statistics Singapore (click here), the home ownership rate of resident households in 2015 is over 90%. With such high ownership rate, it pays to know the kind of mortgage insurance that are available in the market. In Singapore, mortgage insurance is also commonly known as Mortgage Reducing Term Assurance (MRTA).

For the majority of consumers, housing is probably the single biggest investment that one would have made. For the shelter and security it provides you and your loved ones, let’s understand MRTA and its benefits which protect your home and family against unexpected events.

Most Housing and Development Board (HDB) home owners use the Home Protection Scheme (HPS) as it is compulsory for those utilising their CPF-OA balances for monthly loan repayments either fully or partially to have protection against the outstanding loan amount. Apart from HPS, there are other types of insurance products which qualify for an exemption from HPS, as mentioned in our previous article.

Home owners of Executive Condominiums (ECs), privatised Housing and Urban Development Company (HUDC) or private housing, however, are not required to be covered under the HPS scheme. Nevertheless, MRTA is one option to consider for their mortgage protection needs.

What is Mortgage reducing term assurance (MRTA)?

Mortgage Reducing Term Assurance (MRTA) provides coverage for the outstanding home loan amount that has been taken up for the housing purchase. In the event of Death or Total and Permanent Disability of the insured within the coverage term, the MRTA policy pays a lump sum amount.

Regular repayments made to the loan provider will gradually reduce the outstanding loan amount. Likewise, the sum assured will also reduce over time.

Here is an illustration of the reducing sum assured over the years for an initial sum assured of $500,000.

As the sum assured reduces towards the end of the coverage term, it may not seem worth the while to continue paying premiums for coverage over a small amount. Hence, for reducing term insurance,the premium term is shorter than the policy coverage term. Some MRTA products offer the premium payment period as early as 75% of the coverage term. This means, the insured continues to enjoy coverage for the remaining years without having to make any premium payments. This is due to the total premium charged being spread over a shorter period and level throughout.

Comparison of MRTA vs HPS

The comparison table below shows some of the differences between HPS and MRTA:

Home Protection Scheme (HPS)
Mortgage Reducing Term Assurance (MRTA)
Premiums are paid on a yearly basis only.
Flexible premiums payment mode: Monthly, Quarterly, Semi-Annual, Annually.
Premiums can be paid by CPF OA.
Premiums can only be paid by cash.
Coverage is only for Single owner.
Coverage for Single or Joint owners.
Coverage commences upon legal home ownership.
Coverage can commence as early as home loan is approved.
Non-transferable where coverage terminates upon sale of property.
A new application is required again when purchasing a new property and premium amount will also take into consideration the applicant’s current age and health condition.
Remaining insurance coverage can be transferred to the mortgage loan of the new property.
Premium amount to be paid may increase in accordance to the new sum assured.
No other coverage benefits.
Supplementary benefit e.g. Critical Illness and Premium Waiver can be added on to the policy.
Upon successful claim, the sum assured will be paid to the loan provider (HDB or Bank) for the outstanding loan amount.
Upon successful claim, the sum assured will be paid to the beneficiary of the policy.
Applicable to HDB (except EC / HUDC) flats.
Applicable for all housing types.

Based on the comparison table above, MRTA has its edge when compared to HPS. Some interesting highlights are the transferable features, add-on benefits, commencement of coverage and the recipient of the payout upon successful claim.

As MRTA can only be paid in cash, it is also important to take into consideration affordability of the premiums. So, if affordability is not a concern, MRTA is one way to keep that home for you and your loved ones when the covered undesirable event sets in.

At FSM@insurance, these are the MRTA products that we offer:

Enjoy cost savings at Insurance@FSM.

Reach us at advisory@fundsupermart.com and our dedicated team of advisers will be happy to assist you.

Protect yourself and your loved ones now at Insurance@FSM


Related Articles:

Why Insurance

Key Considerations When Buying an Insurance

Get the Most out of Your Insurance with Insurance@FSM

Affordability of Term insurance

How Much Insurance is Needed in Singapore?



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