In Malaysia, there are two types of mortgage life insurance available:
-Mortgage Reducing Term Assurance (MRTA) or Mortgage Decreasing Term Assurance (MDTA); and
-Mortgage Level Term Assurance (MLTA)
MRTA is a life insurance plan with decreasing sum assured over time, and it used just to cover your home loan owed to bank. This plan is usually offered by the bank you are getting the mortgage from, as it is used as protection for the bank in case of misfortunes that stop you from servicing the loan.
MLTA is a slight variation from MRTA and offers and alternative for a borrower who is looking for a life insurance which offers protection plus savings and in some policies returns on the premium. This is a personal plan, where you and your dependents are financially protected when you are no longer around, or have lost the ability to generate income.
Here are the major differences between MRTA and MLTA:
| MRTA | MLTA | |
| Purpose | Protection | Protection, saving & cash value |
| Protection | Sum insured reduces according to loan tenure | Sum insured remains the same on a fixed level sum assured basis |
| Transferable | No | Yes |
| Nomination | Beneficiary is bank | beneficiary can be anyone |
| Financing | Usually financed into home loan | Usually self -financed |
| Payment | Lump sum | Periodic (monthly, quarterly, semi-annually or annually) |
| Premium | Low | High |
| Cash value | None. It has a reducing cash value, which drops to RM0 at the end of the loan tenure. | Yes. It has a fixed cash value (guaranteed) throughout the loan tenure. |
| Claim | Insurance company will pay the loan balance to the bank & the beneficiary will receive the home. | Insurance company will pay the loan balance to the bank & beneficiary will receive the home plus cash. |
The MRTA is most suitable for those who have adequate standalone life and medical insurance, and do not have many financial dependents. This type of insurance will only take care of your home loan, if it is not fully repaid in the event of TPD or death. Your family will not get a single cent from the policy in these events, as the beneficiary is the bank, not your family member.
MLTA is best for those who needs an extra financial protection in the worst case scenario, as it also has a cash value at the end of the policy. This is the best for those who have many financial dependents, for example young children and a stay-at-home spouse.
https://www.imoney.my/articles/mrta-vs-mlta-need
