This is how to differentiate MRTA, MLTA, MRTT, and MLTT  

Catchy/click-bait style 1 liner: Mortgage life insurance provides a means of paying off your mortgage.

Do you know the difference between ‘MRTA’, ‘MLTA’, ‘MRTT’, and ‘MLTT’?

These are different types of life insurance cover for your mortgage.

These products are designed to cover the financial burden of your home loan in the event of death and/or total permanent disability.

This is to ensure your loved ones have financial certainty if something bad happens.

But what is the difference between them, and which one might be the best one for you?

What Is MRTA?

Mortgage Reducing length Assurance (MRTA) is a type of home loan insurance in which the sum insured is intended to decrease over time.

The value of your outstanding debt will decrease as you pay off your house loan.

The amount paid out at the time of a claim covers the complete value of your outstanding home loan.

It is critical to include the terms and value of your house loan when you apply for a MRTA.

Only the amount owned will be paid out to the home loan provider, with no additional benefits.

Is MRTA Compulsory?

MRTA is not compulsory in Malaysia, but the bank offering you a home loan may insist you take it out to cover the value of the loan.

How Much Does MRTA Cost?

Insurance is all about assessing risk i.e. the older you are, the riskier you are, and the higher the value of your home loan, the higher the financial risk.

The cost of MRTA depends on a number of factors, such as your age, the value of your home loan, and the length of your home loan.

The coverage is paid for with a single lump sum at the beginning of the policy.

Is MRTA refundable?

No. In the event of a payout, the money is paid to the bank, with no financial refund or benefit to any third party.

What is MLTA?

Mortgage Level Term Assurance (MLTA) is a type of home loan insurance in which the sum insured remains level during the course of the policy.

In contrast to the MRTA, any additional sum is paid to the beneficiary.

For example if your MLTA coverage is RM500,000 and your home loan balance is RM300,000,  the bank will repay the outstanding home loan, with the remaining RM200,000 going to the policy’s beneficiary.

Is MLTA Compulsory?

MLTA is not compulsory in Malaysia, but home loan providers could make it a condition of receiving a home loan.

How much does MLTA cost?

MLTA, like MRTA, is calculated using parameters such as your age, the value of the insured amount, and the period of your insurance.

Insurance premiums for MLTA are paid in installments over the course of the policy.

As the amount covered in MLTA does not decline over time, the provider faces significantly greater financial risk than with a declining term insurance like MRTA.

That means that MLTA premiums (for a similar insured amount) are likely to be significantly higher compared to the MRTA.

Is MLTA refundable?

Any additional insured amount, above the value of the home loan, is paid to the beneficiary at the point of claim.

What is MRTT?

Mortgage Reduction Term Takaful (MRTT) is a reducing term life insurance product based on the takaful principles of Islamic finance.

It will cover the expense of a mortgage in the case of death or total and permanent disability.

The sum assured for an MRTT, like that of an MRTA, is designed to decrease as the overall value of your home loan decreases.

It is critical to ensure that the outstanding loan and sum assured match during the term of the policy.

Is MRTT compulsory?

MRTT, like other similar covers, is not mandatory. However, some home loans will require you to have a life insurance product in order to cover the total amount of a loan.

How much does MRTT cost?

There is no predetermined price for MRTT insurance.

The cost of the insurance will be determined by risk, which is enhanced by factors such as the amount insured, the length of the policy, and the age of the person purchasing the policy.

Is MRTT Refundable?

Payment of a successful claim on an MRTT policy is made directly to the bank that financed the home loan. No additional money is paid out to individual beneficiaries.

That means if the outstanding value of your home loan is RM100,000 and your MRTT sum assured is RM110,000 at the point a claim is paid, only RM100,000 will be released.

What Is MLTT?

Mortgage Level Term Takaful (MLTT) is an Islamic life insurance that provides financial assistance in the case of death or total permanent disability.

The total sum assured in this policy remains level during the term of the policy.

Is MLTT compulsory?

No, MLTT is not compulsory. However, some banks may require you to have life insurance in order to cover the home loan in the event of death or total permanent disability.

How much does MLTT cost?

When comparing MRTT with MLTT, a level-term assurance is more likely to be more expensive than one where the amount paid out decreases over time.

This is because the financial risk for banks is significantly higher on a cover that will pay out the same amount at any time of the policy as compared to one where the total sum assured reduces over time.

MLTT costs are determined by factors like as your age, length of coverage, and total amount covered.

Is MLTT Refundable?

MLTT Takaful Insurance pays out any additional sum assured directly to the policy owner or beneficiaries in the event of a claim.

For example, if your home loan is RM200,000 but your insurance is RM300,000, RM200,000 would be paid to the bank to cover the home loan, with an additional RM100,000 paid out to the beneficiary.

Which Mortgage Life Insurance Is Best For You?

As each individual’s circumstances are different, it is important to access the different covers highlighted above and identify which policy will best meet the needs of your loved ones in the event that the worst happens.

Mortgage life insurance provides a valuable financial safety net in difficult times, so it’s worth considering even if it’s not a mandatory requirement of your home loan offer.

If you are not sure which coverage is right for you, then speak to a financial expert.

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