The bank shared with Asian Banking and Finance why Singaporeans do not buy mortgage insurance in the first place.
OCBC Bank's Mortgage Protector Advantage allows the customer to pay annual premiums, then refunds all the premiums to the customer at the end of the policy term if no claim is made.
Mortgage Protector Advantage is underwritten by The Overseas Assurance Corporation, a wholly-owned subsidiary of Great Eastern Holdings and a member of the OCBC Group.
The new product is meant to address one signal fact: According to a survey conducted with 300 private property owners by OCBC Bank in 2011, 59% do not have mortgage insurance. The Bank estimates that the percentage of home loan customers who do not buy mortgage insurance has remained relatively flat over the years, even though customers have taken larger loans as a result of rising home prices.
The two main reasons why customers do not buy mortgage insurance is that they lack knowledge about mortgage insurance and they are unwilling to pay for mortgage insurance premiums.
According to the bank, only 6% of the survey respondents ranked death or terminal illness as their top fear when buying a property. Thus many homeowners do not buy mortgage insurance plans to protect against the inability of their dependents to repay their large home loans as they think death or total and permanent disability is unlikely to affect them at their relatively young and healthy age.
OCBC shared other details with Asian Banking and Finance on what Singaporeans fear when buying a property:
Increase interest rates: 13.2%
Capital loss of investment property: 17.2%
Capital loss for primary residence: 28.6%
Loss of job: 21.7%
Unable to get rent I need: 3.9%
Pay cut: 5.9%
Loss of job for spouse: 6.8%
Terminal illness / death: 6.4%
Mr Lim Wyson, Head of Global Wealth Management, OCBC Bank, said: “Customers have told us that homebuyers give low priority to covering their outstanding housing loans. This is worrying because a housing loan is one of the biggest long-term liabilities for any homeowner, and most may underestimate the financial burden that might be passed on to their dependents. Yet the last thing that they want is for their families to lose the roof over their heads if the mortgage is not insured.”
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