Could You Be Leaving Your Family Homeless?

Keeping your home sweet home

 

You’ve bought your dream house, decorated it in style and moved in. The location is great, the view is spectacular and the family is happy.

 

Perhaps you took out a hefty home loan, and paying a significant portion of it with cash.
You are managing well. But it could turn out bad if something happens to you – if you lose your job, or worse.
Your beautiful house is re-possessed by the bank and your family is left homeless.
 

What can you do?

If you own private property, consider a Mortgage Reducing Term Assurance (MRTA). It’s a form of Decreasing Term Life Insurance, which means the amount you are insured for decreases over time.

The plan helps you settle the unpaid portion of your housing loan with a sum of money, if you are no longer able to make loan payments. This means your spouse and children will not be left with a mortgage burden.

(Owners of HDB flats who have purchased their flats using their CPF funds have a similar plan under the compulsory Home Protection Scheme.)

The MRTA is often portable, which means you can continue with the same plan even after you sell your current property and buy another one.

If you are concerned about stressing your already-overloaded monthly payments, MRTA premiums generally tend to be lower than typical life insurance policies.

You also pay a fixed premium throughout regardless of age band.

And, insurers offer plans where you can finish paying premiums earlier but the MRTA policy will still be in force until the home loan period ends.

 

Should you do it?

However, as a decreasing term insurance plan, the MRTA has no cash value. It’s basically money spent.

However if you are relatively young and healthy, you might be able to obtain a level (non-decreasing) term life insurance for the same amount as your mortgage, with premiums that are comparable or lower to an older person’s MRTA premium.

Whole term life insurance plans would have a cash value at the end of the term, with compounded interest over time that could give you better value for your money.

 

Safeguarding your belongings

Did you leave the iron on? The stove? Or maybe your neighbour did. It happens. Or is your entire neighbourhood watch group, and yourself, away on holiday?

Home protection insurance plans provide coverage against the loss of, or damage to the contents of your home.

Some plans also offer cash reimbursements if you end up having to seek shelter at a hotel, or need to replace those hunks of meat in your freezer that ended up going bad.

 

Protecting your investments

Just as you would like to protect your home, there are ways to protect that nest egg or your child’s inheritance.

If you are invested in stock market, there are ways to help you avoid big losses when the market takes a hit.

 

Many eggs, different baskets

Spread out your risk by diversifying your interests. For stocks, make sure you are invested in different companies that operate in different business sectors.

Another option is bonds, which is debt issued by the government or companies. These pay out an interest income periodically and returns your principal investment at the end of the bond term.

Consider also funds that track the broader market, such as index and exchange-traded funds.

The bottomline

As with all significant purchases, be sure to do your homework to know what you are buying into. Compare across insurance providers to ensure you get a good deal.

Help your family stay happy.

 

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