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
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.
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.
In lament term with example :
For example : The applicant name is Ken. He's a 24 male and bought a property for 230k but he only take 100k loan.
So if he purchase RM100k for 30 years MRTA the premium will be RM2165 and the surrender value from time to time is less and less. So, if anything happen to Ken at 5th year, the benefit he get from insurance com will be RM95299 while 10th year will be RM87319. So at the end, the value will be zero at 30th year.
If he purchase same RM100k 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. If Ken is TPD and can't make a source to pay for monthly installment, the benefits he get is RM100k no matter at which year. If Accidental death it would be X 2, the benefits will be RM200k. 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. If Ken have nothing happen at 30th year, he can get back the value he prepaid. This is the benefit you get from MLTA. And, Ken is only 24, if he buy a better property, he can bring this MLTA over to that property and extend it.
for further advise,feel free to pm or email me @ [email protected]
Mortgage Specialist / Financial Services Consultant
H/P : 013-3747762
Financial Advisors Group of
Prajna Advisors (Asia) Sdn Bhd
ZP-03-07, Zest Point, Lebuhraya Bukit Jalil
BK9, Bandar Kinrara, Puchong
facebook : http://www.facebook.com/PFA.Asia
website : http://www.prajna-advisors.my
blogspot : www.prajna-advisors.blogspot.com
Tel / Fax: 018-629 9836
yang bahasa melayu ada tak TT?