Many friends have asked me this question: “Can we use the AVIVA Mindef Group Insurance to cover for mortgage liability?”.
I have always viewed coverage from group plans (including the Mindef one) as supplementary rather than the main coverage. In my opinion, mortgage liability coverage is an important exercise. Getting a personal plan is better for the following reasons.
Remember, covering your mortgage liability is not for you, it is for your family.
Firstly, lump sum payout if you are down with Total & Permanent Disability (TPD)
With a personal insurance plan, any insurer, the TPD benefit is paid out out in one lump sum (unless it is above $2m sum assured level). If you are claiming for $1m, you will receive $1m.
The Mindef Group Insurance however pays it over 3 years. If you are insured for $1m, you will receive $200k now, $400k the next year and the year after.
These are the AVIVA Mindef Group Insurance policy wordings.
If the sum payable in respect of a valid claim is above S$200,000, the Company will first pay a lump sum of S$200,000 and pay the balance in three (3) equal annual instalments.
You can’t really pay off the mortgage and get the mortgage instalments off your mind.
Secondly, personal term plans can offer you “Guaranteed Issuance Option”
What is it?
This is a free option given to you if you want to buy more insurance in future for the following life stage events. Even if you are unhealthy, there will be no sub-standard premium loadings, exclusions or counter offers.
- (1) Change of marital status
- (2) Becomes a parent by having a new born child, or legally adopt a child.
- (3) Graduate from tertiary education.
- (4) Purchases a property.
The fourth point is really interesting. That is for you to use if you purchase another property in future.
# Do note that while the extra insurance coverage is fully underwritten and accepted at standard terms, the premiums of that portion will be higher because of age.
Thirdly, NO Nomination of plan
This is really important!
Ministry of Defence (“MINDEF”) and Ministry of Home Affairs (“MHA”) are contractually “The Policyholder” for the Group Insurance Voluntary Scheme. That means that the plan does not come under the framework of nomination of beneficiaries under the Insurance Act (Cap. 142).
The distribution of this insurance amount will be done with our intestacy law. This is problematic! In certain situations, such as you and spouse pass away together in an accident, the monies are going to get split all over the place.
The original purpose of insuring to cover the home loan and keep the house will not be met.
Premiums can be cheaper
Especially if you are young, it is cheaper to do it on a personal plan. Try our in-house calculator. Click below.
What we do for planning your mortgage liability coverage
1) Compare term plans effectively for you. We collaborate with multiple insurers and we have in-house tools
2) Source for the best discounts from insurers based on your coverage size.
3) Preliminary underwriting enquires if you have health conditions
4) Planning if you want to purchase critical illness riders to cover your loan against such an event
5) Will writing and nomination advice
Again, covering your mortgage liability is not for you, it is for your family. It is for your children.