MRTA and MLTA: A beginner’s guide to mortgage insurance

What’s the difference between MRTA and MLTA?   

In Malaysia, two mortgage life insurance are available to homebuyers – Mortgage Reducing Term Assurance (MRTA) and Mortgage Level Term Assurance (MLTA).

Allianz Life chief executive officer Joseph Gross explained that MRTA and MLTA are commonly pegged to a home loan to cover the loan in the event of the death or TPD of the insured.

“The key difference is MRTA’s sum assured reduces over time while MLTA’s sum assured remains constant throughout the term of the policy,” he said.
Some home loans like flexi home loans allow one to make withdrawals but it will reduce MRTA’s sum over time. When the amount owed to the bank is higher than the MRTA’s sum, the MRTA will not be able to fully cover the home loan.

mrta

“While MLTA comes at a higher premium, the flat sum meant the borrower and the family will not have the same concern,” he added. Since the bank is MRTA’s beneficiary, it is unable to protect a borrower’s family in totality. MLTA is more personal and often protect your next of kin. If anything happens, the family claims the insurance money. This money can be used to settle the outstanding loan amount since MLTA benefit is fixed sum assured.

When asked if MRTAs and MLTAs are absolutely necessary, Jared Lim, co-founder of Loanstreet suggested that borrowers weigh their risks holistically from an estate planning perspective.

“If you are sufficiently covered by a life insurance policy, you can even consider skipping the MRTA or MLTA. But note that your beneficiaries will get lesser if you lose your ability to generate income,” Lim said.

He added that borrowers must go through the trouble of making sure their next of kin is aware of their policy and know how to make claims. The process of the insurance claim is basically the same for MRTA or MLTA. In the event of death, the claimant would need supporting documents such as certified copy of death certificate, a copy of deceased identification card, burial permit, medical report, identity of claimant, proof of claimant relationship with deceased and most importantly, the original policy document.

*The above are excerpts from one of the articles in theStarproperty.my. The article is first published in StarProperty.my pullout on Nov 2. 

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