How Much Mortgage Insurance Coverage Do You Need? A Singapore Homebuyer's Guide
The amount of mortgage insurance coverage you need depends on three factors: your outstanding loan balance, your loan tenure, and whether you plan to upgrade properties in the future. Most Singapore homebuyers need coverage equal to their full mortgage amount, though some situations call for partial coverage or alternative protection strategies. At Homejourney, we believe transparent financial guidance is essential to building trust with property buyers—which is why we've created this comprehensive breakdown to help you determine exactly what coverage level protects your family while keeping premiums affordable.
Understanding Mortgage Insurance Coverage Amounts
Mortgage insurance serves a critical purpose: it pays out a lump sum to clear your outstanding home loan if you pass away, become terminally ill, or suffer total permanent disability (TPD).[2] This protection ensures your family doesn't lose the home due to an unpaid mortgage during their most vulnerable time.
The coverage amount you select should ideally match your outstanding loan balance at the time of purchase. However, the "right" amount varies based on your specific circumstances and the type of insurance product you choose.[4] For HDB buyers using CPF, you must be covered for at least the proportion of monthly housing instalments you personally pay—if you pay 80% of the monthly amount, you need at least 80% coverage.[2]
Coverage Calculation Formula
Here's the straightforward approach: Minimum Coverage = Outstanding Loan Balance + Loan Tenure Remaining. If you're taking a $600,000 HDB loan over 25 years, you need coverage of at least $600,000 that extends for the full 25-year period (or until age 65, whichever comes first).[1]
However, this is the minimum. Many financial advisors recommend coverage that accounts for potential interest rate increases or unexpected financial obligations. Use Homejourney's mortgage eligibility calculator at Bank Rates to determine your exact borrowing capacity and align your insurance coverage accordingly.
Three Types of Mortgage Insurance: Coverage Comparison
Singapore offers three primary mortgage insurance options, each with different coverage structures and premium implications. Understanding these differences is crucial to selecting the right protection level for your needs.
1. Home Protection Scheme (HPS) – Decreasing Coverage
HPS is a Mortgage Reducing Term Assurance (MRTA) product offered through CPF and is compulsory for HDB buyers using CPF savings unless you have qualifying private insurance.[1] The coverage amount decreases over time as your loan balance decreases—this is by design, since you need less protection as you pay down your mortgage.
Coverage characteristics: Your sum assured starts at your full loan amount and reduces proportionally with each payment. If your outstanding balance drops to $200,000 and you're covered for 100%, HPS will clear exactly $200,000 of remaining debt.[2] The premium remains fixed throughout the policy term, making it predictable and budget-friendly.
Key limitation: HPS cannot be transferred to a new property. When you upgrade from an HDB flat to a resale flat or private property, you must apply for new coverage at your current age, which typically increases premiums.[1] Additionally, if you develop health conditions between purchases, you may be declined for new HPS coverage entirely.[2]
2. MRTA (Mortgage Reducing Term Assurance) – Flexible Decreasing Coverage
MRTA is a private mortgage insurance product that functions similarly to HPS but offers portability—the policy stays with you even if you move homes.[4] Like HPS, your coverage amount decreases over time to match your declining loan balance, keeping premiums lower than level term options.
Coverage characteristics: Your sum assured decreases at a predetermined rate matching your mortgage repayment schedule. This means you're only paying for the protection you actually need at each stage of your loan.
Key advantage: Unlike HPS, your MRTA policy continues to cover you across multiple properties and multiple loans, as long as each new loan doesn't exceed your original coverage amount and the tenure doesn't extend beyond age 65.[1] This makes MRTA ideal for buyers planning to upgrade properties in the future.
3. Level Term Insurance – Constant Coverage
Level Term insurance maintains a fixed coverage amount throughout the entire policy period, regardless of how much you've paid down on your mortgage.[1] This means your sum assured stays constant—if you purchase $1,000,000 in coverage, it remains $1,000,000 until the policy expires.
Coverage characteristics: Your coverage amount never decreases, providing consistent protection that can cover your mortgage, personal loans, and other financial obligations simultaneously. This "extra" coverage beyond your mortgage can be valuable if you have other debts or want to leave an inheritance.
Key advantage: Level Term premiums are locked in at the age and health status when you first purchase the policy. A 30-year-old non-smoker who buys Level Term coverage will pay the same premium 20 years later—even though they're now 50 years old.[1] This makes it exceptionally valuable for buyers planning long-term property upgrades, as you can apply the same policy to multiple homes without age-based premium increases.
Real-World Coverage Amount Examples for Singapore Buyers
Let's examine how different buyer profiles should approach coverage decisions:
Scenario 1: First-Time HDB Buyer, Age 30, Staying Long-Term
Purchase price: $450,000 | Loan amount: $400,000 | Loan tenure: 25 years (to age 55) | Plan: Stay in this flat indefinitely
Recommended coverage: $400,000 with HPS or MRTA. Since you're staying in the property, decreasing coverage matches your needs perfectly. HPS premiums will be lower than private alternatives, making it the most cost-effective choice. Your coverage decreases as you pay down the loan, and by age 55 when the loan is fully paid, you no longer need protection.
Scenario 2: HDB Buyer, Age 35, Planning to Upgrade
Purchase price: $550,000 | Loan amount: $500,000 | Loan tenure: 25 years | Plan: Upgrade to resale flat in 10 years
Recommended coverage: $1,000,000 Level Term insurance. Why? In 10 years, you'll be 45 and buying a resale flat worth $700,000-$800,000 with a new $600,000 loan. If you wait until then to buy mortgage insurance, premiums will be significantly higher due to your age. By purchasing Level Term now at age 35, you lock in lower premiums that remain constant even when you upgrade. Your $1,000,000 coverage can protect both your current $500,000 loan and your future $600,000 loan simultaneously.[1]
Scenario 3: Private Property Buyer, Age 40, Multiple Mortgages
Purchase price: $1,200,000 | Loan amount: $900,000 | Loan tenure: 25 years | Existing: $300,000 personal loan
Recommended coverage: $1,200,000 Level Term insurance. You need $900,000 to cover the mortgage, but you also have a $300,000 personal loan. Level Term coverage of $1,200,000 protects both obligations, ensuring your family isn't burdened with multiple debts if something happens to you. The constant coverage amount also provides flexibility if you refinance or take additional loans in the future.
Coverage Amount vs. Premium Cost Comparison
The relationship between coverage amount and monthly premium varies significantly by insurance type and your personal circumstances:
HPS Example: A 40-year-old non-smoking male with a $600,000 HDB loan over 25 years pays approximately $851.40 per year ($70.95/month) for full HPS coverage.[1] This decreasing coverage becomes more affordable as your loan balance shrinks.
Level Term Example: The same 40-year-old can obtain $600,000 Level Term coverage for as low as $816.45 per month ($9,797.40 annually)—but this is for a much higher coverage amount and includes additional benefits.[1] However, if that same person had purchased Level Term at age 30, the annual premium would have been locked in at approximately $615 per year, remaining constant even at age 50.[1]
The key insight: buying mortgage insurance earlier locks in lower premiums for life, making Level Term attractive for younger buyers even though the monthly cost appears higher initially.
How to Determine Your Exact Coverage Needs
Follow these steps to calculate the right coverage amount for your situation:
- Determine your outstanding loan balance: This is the amount you still owe on your mortgage at the time you're purchasing insurance. For new purchases, this equals your loan amount.
- Calculate your loan tenure: How many years until your loan is fully paid? Remember that CPF-backed mortgages must be cleared by age 65.
- Assess future property plans: Do you plan to stay in this property forever, or will you upgrade in 10-15 years? This determines whether decreasing or level coverage makes sense.
- Consider other debts: Do you have personal loans, car loans, or credit card debt that would burden your family? Level Term can cover these too.
- Evaluate health status: If you have pre-existing conditions, private MRTA or Level Term may offer coverage with exclusions, whereas HPS simply approves or declines your application.[2]
- Compare premium costs: Use Homejourney's mortgage eligibility calculator and bank rates comparison tool at Bank Rates to see how different coverage amounts affect your overall affordability.
Coverage Requirements for HPS Exemption
If you want to opt out of mandatory HPS, CPF requires that your alternative insurance policy meets specific criteria: it must cover your outstanding housing loan up to the full term of the loan or until you turn 65, whichever is earlier.[1] This means:
- Your coverage amount must be at least equal to your outstanding loan balance
- Your policy must remain active for the entire loan tenure
- You must provide proof of this coverage to CPF before withdrawing savings for your HDB loan
Many buyers use Level Term insurance specifically to satisfy HPS exemption requirements while gaining the flexibility of portable coverage across multiple properties.
Coverage Portability: A Critical Decision Factor
One of the most important—yet overlooked—aspects of mortgage insurance is whether your coverage moves with you to new properties:
HPS: Not portable. Each property requires a new HPS application at your current age, resulting in higher premiums and potential rejection if your health has changed.[1]
MRTA: Portable. Your existing policy continues to cover you across multiple properties, as long as new loans don't exceed your original coverage amount.[4]
Level Term: Fully portable. Your fixed coverage amount and locked-in premium follow you to any property, any number of times.[1]
For Singaporean buyers who statistically upgrade properties every 10-15 years, portability represents significant long-term savings and peace of mind. This is why many financial planners recommend Level Term for buyers under age 40 with upgrade intentions.
Coverage Gaps: What Mortgage Insurance Doesn't Protect
Understanding what mortgage insurance excludes is equally important as knowing what it covers:
- Property damage: Mortgage insurance protects the loan, not the physical property. You need separate fire insurance and home contents insurance for that.[4]
- Unemployment: If you lose your job and can't pay the mortgage, mortgage insurance doesn't help. You'd need payment protection insurance or emergency savings.
- Pre-existing conditions: HPS typically excludes claims related to conditions you had before applying. Some private policies offer coverage with exclusions.[2]
- Suicide: Most policies have a 12-month suicide exclusion period from the start date.
- High-risk activities: Certain occupations or hobbies may be excluded or require additional premiums.
Making Your Coverage Decision: A Homejourney Framework
At Homejourney, we believe the right mortgage insurance decision balances three priorities: adequate protection, affordable premiums, and future flexibility. Here's our decision framework:
Choose HPS if: You're buying an HDB flat, plan to stay indefinitely, and want the lowest possible premiums. HPS is compulsory anyway unless you have qualifying alternative coverage.
Choose MRTA if: You're buying an HDB flat, might upgrade in 10-15 years, and want portability without the higher cost of Level Term. MRTA provides the middle ground between affordability and flexibility.
Choose Level Term if: You're under 40, plan to upgrade properties multiple times, have other debts beyond the mortgage, or want to lock in premiums before health conditions develop. The higher initial cost pays dividends through portability and fixed premiums across multiple properties.
To compare how different coverage amounts affect your overall mortgage affordability, use Homejourney's mortgage eligibility calculator at Bank Rates . This tool helps you see exactly how much you can borrow and what coverage levels fit your budget.
