Tuesday, 26 June 2012

MLTA vs MRTA


The Purpose of Having MRTA and MLTA

Your house is probably the largest investment you will ever make in your life. It will become even more precious when you turn into a happy home filled with wonderful memories of your growing family. With a MRTA or MLTA you will be able to secure your precious home for your loved ones. It prevents serious financial liability from falling on your family should something happen on you such as death, total permanent disability or critical illness (Normally MRTA not include this benefit).
In the event of Total Permanent Disability (TPD) or loss of life, MLTA or MRTA plan will ensure repayment of your outstanding mortgage in the event of Total Permanent Disability (TPD) or loss of life. Rest assured that your ongoing loan repayments will not financially “burden” your loved ones.

1) Mortgage Reducing Term Assurance (MRTA) or sometimes call Mortgage Decreasing Term Policy

As you can see from the Chart 1.1 below, the coverage of MRTA will reduce annually from RM500,000 to zero at the end of the loan tenure. This mean that if anything happened in this period the insurance company only payout the claim according to that year coverage. 

Chart 1.1: MRTA vs Loan Tenure

Example 1:

* Loan Amount: RM 500,000.00
* Loan Tenure: 30 years
* Outstanding loan amount (at point of death / TPD): RM400,000.00

Chart 1.2: MRTA vs Outstanding Loan (500K)
Example, for the above cases, when the Insured passed away or Total Permanent Disable (TPD) at 11th year with a outstanding of RM400K as shown in Chart 1.2, the insurance company will payout RM400k to the lender/bank and the remaining RM20K if any to the nominee (s) of the Insured (Assumed that the coverage is RM420K that time). Noted: (Different Insurance company will have a different schedule of TPD claim payment).

2) Mortgage Level Term Assurance (MLTA)

From  the chart 2.1 below, the coverage of the insurance remain at RM500,000 all time until  the end of the loan tenure. This mean that if anything happened in this period, a amount of RM500k will payout by the insurance company. 

Chart 2.1: MLTA vs Loan Tenure

Example 2:

* Loan Amount: RM 500,000.00
* Loan Tenure: 30 years
* Outstanding loan amount (at point of death / TPD): RM400,000.00

For the above cases, when the Insured passed away or Total Permanent Disability (TPD) at 11th year with a outstanding of RM400K, the insurance company will payout RM400k to the lender/bank and the remaining RM100k to the nominee (s) of the Insured. Noted: (Different Insurance company will have a different schedule of TPD claim payment).

3) Difference between MRTA and MLTA

As refer to below chart 3.1. It clearly shown the different between MRTA and MLTA. Each serve different purpose depend on your financial planning. If you not planning to do refinancing or purchase another new property in the future MRTA is seem more suitable for you and also for senior citizens (Due to higher insurance charges on age in MLTA). If you are planning to do refinancing or purchase another property again, MLTA is more suitable for you but beware that most of the bank’s MLTA can’t transfer the policy to you after you terminate the loan account. 

Chart 3.1: MRTA vs MLTA
Thank for the info. Credit to http://www.malaysialoan.com.my

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