MRTA vs. MLTA: Which Mortgage Insurance is Right for You?

When buying a home in Malaysia, selecting the right mortgage insurance is crucial. Mortgage Reducing Term Assurance (MRTA) and Mortgage Level Term Assurance (MLTA) serve different purposes and understanding these can save you money while ensuring financial security.

What Is MRTA?

• Purpose: Pays off the remaining home loan balance in case of death or total permanent disability.
• Cost: One-time premium, usually cheaper.
• Cash Value: None; covers only the loan amount.
• Who Should Consider: Individuals without dependents or those seeking a lower-cost option.

What Is MLTA?

• Purpose: Provides coverage and builds cash value, which can be withdrawn or borrowed.
• Cost: Higher premiums paid annually.
• Cash Value: Offers savings and investment elements.
• Who Should Consider: Families or those looking for flexible financial protection.

Comparison Table

Features	MRTA	MLTA
Premium Type	One-time	Annual
Coverage	Loan balance	Full sum insured
Cash Value	None	Savings/investment potential
Flexibility	Low	High

Example Scenario

Example 1: MRTA Costs

Ali buys a RM500,000 house with a 30-year loan. The MRTA premium costs RM8,000 upfront. If Ali passes away at Year 20 with RM200,000 remaining on the loan, MRTA fully covers the outstanding amount. Ali's family receives the property debt-free but no additional funds.

Example 2: MLTA Costs

John buys a RM500,000 house with the same loan tenure. He opts for an MLTA costing RM2,500/year. By Year 20, John’s MLTA accumulates a cash value of RM100,000. If John passes away, his family gets RM200,000 (outstanding loan balance) and an additional RM100,000 in cash.

Features	MRTA	MLTA
Cost (30 Years)	RM8,000 (One-time)	RM75,000 (RM2,500/year)
Coverage	Loan Balance	Loan + Cash Value

Disclaimer

These calculations are illustrative. Actual premiums and cash values depend on your age, health, and chosen policy terms.

Key Takeaways

• MRTA suits borrowers seeking low-cost coverage.
• MLTA provides flexibility and additional financial benefits, but at a higher cost.

Choosing between MRTA and MLTA ultimately depends on your unique financial situation and long-term goals. While MRTA offers simplicity and affordability, MLTA could provide added peace of mind with its broader coverage and potential investment benefits. It’s important to research and compare different policies, talk to insurance advisors, and consider factors such as your loan amount, term, and personal needs before making a decision. Take your time to make an informed choice that aligns with your financial future!