MRTA Vs. MLTA: Which Do You Need?
With life there comes a whole lot of risk right? Well if you’ve taken out a loan on a home or some other property, then there’s certainly a lot of risk involved. One of the primary risks is not simply a loss in income, but in a person befalling some unfortunate situation where their life ends. Any serious home buyer is going to need to make sure they have some form of contingency plan in place in this case.
The best contingency plan would be for you to have some form of mortgage insurance policy. These policies are all about controlling risk. You can protect the bank, making sure they get paid off in the case something bad happened to you and you can protect your loved ones who are dependent on your income for the house you’re paying on.
In Malaysia there are two primary forms of mortgage insurance you can take out. The first is MRTA and the second is MLTA. Which one of these do you actually need though? Well here’s a simple layout of what both of these are and what they offer to the policy holder.
Mortgage Reducing Term Assurance (MRTA)
Mortgage Reducing Term Assurance is considered to be one of the primary forms of coverage you can get. When you go for a home loan, you’ll find the vast majority of banks are going to have this as an option. It’s even said that this form of assurance provide the most affordable option to borrowers and as a result it’s the preferred choice.
Here are the main elements of MRTA. When you take out this form of policy there will be no other beneficiary besides the bank. What this means is in terms of any form of cash payout in the case of death, then it’s going to go directly to the bank. A serious disability can also cause such a policy to be invoked, but the disability would have to be one where it was permanent and of a severe nature.
Any family members you have can’t expect to receive anything from this form of policy. The main benefit they get is the reassurance of knowing that any mortgage debt on the house is going to be settled and it won’t be a debt they have to worry about.
Mortgage Level Term Assurance (MLTA)
Mortgage Level Term Assurance (MLTA) is the other type of policy you can get. There is one important distinction with this form of mortgage insurance. It provides a whole lot more than just a settlement of the mortgage to the bank in case of a borrower’s death or debilitating permanent disability.
MLTA is also able to help a borrower to make sure that their family and other loved ones are able to get some form of cash payout. It can be looked at as a form of life insurance due to this, seeing as how it offers protection and a cash payout.
With this form of insurance you’d have to choose someone within your family to be the primary beneficiary of the policy. Should something happen to you such as death or complete permanent disability, then they would get a cash payout that was far above just what was owed on the house.
If you already have some form of life insurance, then you don’t need MRTA. If you don’t though and you borrow from a bank to purchase a home, then MRTA can be perfect for you. MLTA works best for people who don’t already have some form of life insurance, but the main drawback is that it does tend to be a little more expensive.