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MRTA vs MLTA in Malaysia

MLTA and MRTA are both types of insurance policies related to housing loans in Malaysia.

MLTA stands for Mortgage Level Term Assurance, while MRTA stands for Mortgage Reducing Term Assurance.

MLTA is a type of life insurance policy where the coverage amount remains constant throughout the loan tenure. In the event of the borrower’s death or total permanent disability, the insurance coverage will pay off the outstanding loan amount.

MRTA, on the other hand, is a type of life insurance policy where the coverage amount decreases over time, in line with the reducing outstanding loan balance. The purpose of MRTA is to ensure that in the event of the borrower’s death or total permanent disability, the insurance coverage is sufficient to pay off the outstanding loan amount at that particular point in time.

The benefits of MLTA include:

  1. Constant coverage amount: MLTA provides a fixed coverage amount throughout the loan tenure, which provides peace of mind to borrowers and their families.
  2. Flexibility: MLTA allows borrowers to choose the coverage amount based on their needs, which may exceed the loan amount.
  3. Potential savings: MLTA policies may offer cash value accumulation or investment-linked features, allowing borrowers to potentially grow their savings over time.
  4. Portability: MLTA policies are usually portable, meaning that the coverage can be transferred to a new property if the borrower decides to refinance or sell the current property.

The benefits of MRTA include:

  1. Lower premiums: MRTA premiums are generally lower compared to MLTA premiums, as the coverage amount decreases over time.
  2. Simplicity: MRTA is straightforward and easy to understand, as the coverage amount is directly linked to the outstanding loan balance.
  3. Mandatory requirement: MRTA is often a mandatory requirement for housing loan applications in Malaysia, providing assurance to lenders.

Ultimately, the choice between MLTA and MRTA depends on the borrower’s needs and preferences. It is advisable to consult with a financial advisor or insurance agent to determine which option is more suitable for your specific circumstances.

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