Mortgage Life Insurance, MRTA/MDTA vs MLTA for Property Financing




Mortgage Life Insurance is an insurance that loan owner purchase when buying a property. It is designed to settle the outstanding loan balance in the event that the borrower dies or suffers from total and permanent disability (TPD) prior of settling the loan.

Basically there are two types of mortgage life insurance that are available in the market. There are Mortgage Reducing Term Assurance (MRTA) or Mortgage Decreasing Term Assurance (MDTA) and Mortgage Level Term Assurance (MLTA).

The table below shows the different between MRTA/MDTA and MLTA

MRTA MLTA
Purpose Protection Protection, Saving & Cash Value
Protection Reducing Protection throughout the loan tenure. Protection is leveled throughout the loan tenure.
Transferability Non transferable on New Purchase or Refinance. Premium will increase while age increases. Transferable. One MLTA can be attached to Any Loan. Transferable on New Purchase or Refinance.
Cash Value Reducing Cash Value throughout the loan tenure. Normally is much lower than Premium, and drop to RM0 at the end of loan tenure. Fixed Cash Value (Guaranteed) throughout the loan tenure. Policy Holder will get back the paid premium in the future.
Nomination Beneficiary is bank Beneficiary can be anyone.
Payment Lump Sum Payment or financed into Mortgage Loan. Payment Mode can be Annually, Semi Annually, Quarterly or Monthly.
Premium Low High
Example on premium* One time RM5,931.7 RM303.60 monthly or RM3,643.20 yearly or RM109,296 throughout the tenure
Example if there is no death or TPD* At the end of tenure owner will received RM0 At the end of tenure, owner will received RM109,296
Example if there is death or TPD** Insurance company will pay the loan balance of RM186k to the bank & beneficiary will received the home. Insurance company will pay the loan balance of RM186k to the bank & beneficiary will received the home plus RM50k cash

Note

* Example based on a loan owner at the age of 26 taking RM236k loan for 30 years

** Example based on loan remaining of RM186k


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