Why Level Term Insurance Is Better Than Mortgage Insurance in Singapore

When comparing protection options for a home loan, many homeowners are starting to realise that level term insurance is better than mortgage insurance in Singapore. Unlike mortgage insurance, level term insurance offers fixed coverage, greater flexibility, and protection that extends beyond just the home loan.

Often when buying a home in Singapore, many homeowners are told they “need” mortgage insurance.

Banks, property agents, and even friends often recommend:

• Mortgage insurance

• Mortgage reducing term assurance (MRTA)

• Home loan protection plans

But here’s the truth most people don’t hear: Mortgage insurance is not always the best or most cost-effective option.

In many cases, level term insurance offers better protection, more flexibility, and greater long-term value.

This article explains the difference between term insurance vs mortgage insurance, how each works in Singapore, and why many homeowners are better off choosing level term insurance instead.

What Is Mortgage Insurance?

Mortgage insurance (commonly called mortgage reducing term insurance) is a life insurance policy designed to cover your outstanding home loan if you pass away or become permanently disabled.

How mortgage insurance works

• Coverage amount reduces over time

• Payout roughly follows your loan balance

• Policy usually ends when the loan ends

• Payout goes toward settling the mortgage

The intention is simple: If something happens to you, your family doesn’t lose the house.

What Is Level Term Insurance?

Level term insurance is a type of term life insurance where:

• Coverage amount stays fixed throughout the policy

• Premiums remain level

• Payout can be used for any purpose

Unlike mortgage insurance, level term insurance is not tied to your home loan, but also can be served as a mortgage insurance should the unexpected happens.

Why Level Term Insurance Offers More Flexibility Than Mortgage Insurance

This difference is crucial.

Read more: How pre-existing medical conditions affect your insurance application

Why Mortgage Insurance Is Often Inefficient

1️⃣ You Pay Similar Premiums for Declining Coverage

With mortgage insurance:

• Your premium stays similar

• But coverage shrinks every year

You are paying for less protection over time.

2️⃣ It Only Covers One Asset (Your House)

Mortgage insurance:

• Only protects the home loan

• Does not help with:

  • Daily living expenses

  • Children’s education

  • Other liabilities

Once the mortgage is settled, the policy has no further use.

3️⃣ No Flexibility If Your Situation Changes

If you:

• Refinance your loan

• Sell the property

• Upgrade to another home

Your mortgage insurance may:

• Become redundant

• Require a new policy

• Lead to wasted premiums

Why Many Singapore Homeowners Prefer Level Term Insurance

✅ 1. One Policy, Multiple Purposes

A level term policy can cover:

• Mortgage balance

• Family living expenses

• Children’s education

• Outstanding liabilities

You are not locked into protecting just one thing.

✅ 2. Full Coverage Even in Later Years

If something happens:

• 10 years into the loan

• 20 years into the loan

Your family still receives the full payout, not a reduced amount.

This extra buffer provides:

• Financial flexibility

• Time to decide whether to keep or sell the property

✅ 3. More Cost-Effective in the Long Run

Many people are surprised to find that:

• Level term insurance is comparable in cost

• Sometimes even cheaper than mortgage insurance

Yet it delivers far more value.

Common Myth: “Mortgage Insurance Is Mandatory”

In Singapore:

• Mortgage insurance is NOT compulsory

• Banks may recommend it, but you are free to choose

As long as you have sufficient coverage, banks cannot force you to buy mortgage insurance.

When Does Mortgage Insurance Still Make Sense?

Mortgage insurance may be suitable if:

• Budget is extremely tight

• You only want to cover the loan, nothing else

• You are older and want the lowest initial coverage

But for most working adults, it is not the most efficient solution.

A Smarter Strategy: Level Term Instead of Mortgage Insurance

A common and effective approach:

• Buy level term insurance

• Set coverage amount equal to:

  • Outstanding loan

  • Plus additional buffer for family needs

This way:

• One policy covers everything

• You avoid multiple overlapping plans

• Protection remains flexible as life changes

Term Insurance vs Mortgage Insurance: Which Should You Choose?

If your goal is:

• Just clearing the loan → mortgage insurance may suffice

• Protecting your family’s financial future → level term insurance is superior

For most homeowners in Singapore, level term insurance provides better value, flexibility, and peace of mind.

Read more: Why Level Term Insurance Is Better Than Mortgage Insurance in Singapore

👉 Compare Level Term Insurance Plans in Singapore

If you are:

• Buying a home

• Refinancing

• Reviewing your protection

• Considering mortgage insurance

It’s worth comparing level term insurance options first.

👉 Compare level term insurance plans from multiple insurers and see your premiums now

This helps you choose protection that works beyond just the mortgage.