cpf members to enjoy 12% savings on HPS premiums

i bring u good tidings because cpf members on the HPS (home protection scheme) can expect to enjoy significant savings from january 01, 2012.

the cpf board said that as at december 20, 2011, approximately 362,500 members will benefit from the lower premiums from the reduction in premiums for the hps. they form 80% of members who are currently paying annual premiums for their hps while the rest will continue to enjoy the low premium rates they are currently paying.

for example, a male member aged 36 years old servicing a $150,000 housing loan from the hdb for a term of 25 years, will pay the new reduced premium of $195.30, instead of $223.05 when he joins the scheme from january 01, 2012.

members who join the hps on or after january 01, 2012 will enjoy the new rates while existing members paying annual hps premiums will pay the lower premiums when they renew or adjust their hps coverage on or after january 01, 2012.

and the last revision in premiums was implemented in 2006.

my comments:

with inflation expected to be higher than normal for 2012, there should be real savings for all cpf members on the home protection scheme with an average of 12% reduction in premiums wef january 01, 2012.

in terms of pricing, how does the hps stand against the competition (from private insurers) even with the average reduction of 12% savings in premiums?

i shall quote just 1 private insurer, ntuc-income's mortgage protection 2004 plan for the given profile of a male, aged 36 years with sum assured of $150,000 for a term of 25 years:

cpf hps: $223.05 (current)
$195.30 (from jan 01, 2012)

ntuc-income: $205.25

although ntuc-income's premium is slightly higher by $9.95, the premium payable is for 18 years only whereas the cpf board will deduct premiums payable for the hps on an annual basis.

therefore, considering the total premiums payable which is $4,882.50 (hps) versus $3,694.50 (ntuc-income), there is a difference of a higher $1,188.00 in premiums for the hps policy if it is kept in-force for the full term of 25 years.

but more can be done to further enhance the home protection scheme. for example, private insurers already have mortgage decreasing term assurance products which offer additional layers of protection through:

a. critical illness coverage and
b. waiver of premium upon diagnosis of any of the 30 specificed critical
illness

because the hps is a plain-vanilla plan, it does not have additonal layers of protection which the consumer can take up through a private insurer's mortgage decreasing term assurance product.

with the re-pricing of hps, i expect private insurers will probably do a review of their current pricing of mortgage decreasing term assurance rates and clearly, competition can only favour the consumer.