Mortgage Life Insurance
Mortgage Life Insurances are designed to pay off the outstanding loan balance in the event that the borrower dies or suffers from total and permanent disability (TPD) before the loan is fully paid off.
Basically there are two types of mortgage life insurance available in the market. One type is commonly known as
Mortgage Reducing or Decreasing Term Assurance (MRTA or MDTA) and the other choice is
Mortgage Level Term Assurance (MLTA).
Mortgage Reducing Term Assurance (MRTA) or Mortgage Decreasing Term Assurance (MDTA)
**MRTA or MDTA is a reducing term life assurance specially designed to protect a loan borrower against death or TPD (total permanent disability) due to natural or accidental causes. Some lenders will allow you to finance and add the premium to your home loan (up to a certain percentage of your loan amount).
**MRTA or MDTA is a simple insurance policy and has become a common and acceptable policy taken up by the borrower whenever he takes up a mortgage loan. The premium is paid upfront in one lump sum. Some lenders will finance and add the premium to your loan. The borrower can choose the amount and tenure of the coverage and the amount of premium will be determined by these factors as well as his age and gender.
**Banks normally encourage the borrower to take up this policy by giving better pricing on their interest rates if the borrower signs up a MRTA or MDTA policy.
**To the borrower this is relatively a hassle free, affordable and necessary policy as their mortgages are covered in the event of any unfortunate incident that may caused death or TPD.
Mortgage Level Term Assurance (MLTA)
MLTA is a slight variation from MRTA or MDTA and offers an alternative for a borrower who is looking for a life insurance which offers protection plus savings and in some policies returns on the premium.
Premium is paid on a
monthly, quarterly, half yearly or yearly basis and the policy holder can choose to have a wider coverage other than death and TPD. The amount of the premium will be determined by the usual factors and the scope of additional coverage.
Comparison and Features of MDTA and MLTA
Life-MLTA
1. Transferable
This policy is transferable whenever the borrower buys a new property or refinances his loan with another bank.
Example: Transfer this policy, adjust the sum assured to match the new loan, as many times as you need.
2. Insurability is Guaranteed
You purchase only once, with the same sum assured, there is no need to prove your health condition again.
3. With Savings or Returns (Cash Value)
Premium paid will be accumulated either as savings or savings plus returns. The cash value can be used to reduce or pays off your mortgage.
MRTA
1. Not Transferable
In most cases, new MDTA policy has to be taken up whenever a borrower changes his properties or refinances his loan with another bank
Example: 5 yrs later, refinancing at the older age, for same tenure of same loan amount, the MDTA cost is higher.
2. Insurability is not Guaranteed
Most of the time every time you finance your property, you have to prove that you are healthy to purchase MDTA.
3. No Cash Value
It is an expense with zero cash value at end of the mortgage tenure.
:: For example ::
The applicant name is Abu. He's a 24 male and bought a property for 230k but he only take 100k loan.
MRTA scenario
1) So if he purchase RM100,000 for 30 years MRTA the premium will be RM2,165 and the surrender value from time to time is less and less.
2) If anything happen to Abu at 5th year, the benefit he get from insurance company will be RM95,299 while 10th year will be RM87,319. So at the end, the value will be zero at 30th year.
MLTA scenario
1) If he purchase same RM100,000 and 30 years MLTA, he needs to pay RM61 every month and gets the level protection. He can choose to pay monthly, quarterly, semi-annually or annually.
2) If Abu is TPD and can't make a source to pay for monthly installment, the benefits he get is RM100,000 no matter at which year. If Accidental death it would be X 2, the benefits will be RM200,000. This is consider savings and you get the level benefits no matter 1st year or 18th or 30th year. Because the surrender value is high and higher.
3) If Abu have nothing happen at 30th year, he can get back the value he prepaid. This is the benefit you get from MLTA. And, Abu is only 24, if he buy a better property, he can bring this MLTA over to that property and extend it.
MRTA (Mortgage Reduce Term Assurance)
- Protect Your Property with one time lump sum payment!!
- Decreasing Coverage
- Anything "un-fortunate" happen to you,the insurance will cover your outstanding of the mortgage loan
MLTA (Mortgage Level Term Assurance)
- Protect your Wealth/Property/Loan/Family with a simple insurance product,specail design for mortgage loan borrower.
- Level Coverage.
- Full Cash Back At Term End
- Transferable
- Option Payment Modes
- Double Protection
Overview of MLTA vs MRTA.
1. MLTA = flexi insurance, MRTA = term insurance
2. MLTA = level protection, MRTA = reducing protection
3. MLTA = low initial premium, MRTA = high initial premium (burden)
4. MLTA = tax relief up to RM6000, MRTA = no tax relief
5. MLTA = cash return(asset) MRTA = no cash return (expense)
6. MLTA = transferrable, MRTA = non transferrable
7. MLTA = death/tpd/critical illness + premium waiver, MRTA = death and tpd only
8. MLTA = level premium, MRTA = higher premium if financed by bank as it is tied to BLR
Bagi mereka yang aktif dalam pelaburan hartanah (jual-beli hartanah), setiap kali kita buat pinjaman kita perlu memohon pelan MRTA dan sekiranya kita ingin menjual hartanah tersebut, kita perlu membatalkan MRTA tersebut dan seterusnya sekiranya kita ingin membeli hartanah lain, kita perlu mengambil sekali lagi MRTA yang lain (1 rumah 1 MRTA). Dan sudah tentu pada masa itu umur kita meningkat dan menyebabkan premium lebih mahal. Kalau mahal masih ok lagi, tapi kalau dah sakit sampai syarikat insurance pun dah tak nak ambil kita sebagai pemegang polisi, Macam mana?
