Mortgage Life Insurance is an insurance that loan owner purchase when buying a property. It is designed to settle the outstanding loan balance in the event that the borrower dies or suffers from total and permanent disability (TPD) prior of settling the loan.
Basically there are two types of mortgage life insurance that are available in the market. There are Mortgage Reducing Term Assurance (MRTA) or Mortgage Decreasing Term Assurance (MDTA) and Mortgage Level Term Assurance (MLTA).
Mortgage Term Assurance
| Mortgage Reducing Term AssuranceMRTA | Mortgage Level Term AssuranceMLTA |
| - Cover will reduce throughout loan tenure (cover Outstanding loan) | - Cover remain fixed throughout loan tenure (cover Principal loan) |
| - No cash returned | - Have cash return |
| - Cannot transfer when refinance/new purchase | - Can transfer when refinance/new purchase |
| - Cover stop after loan tenure end (cover expired at 65) | -Cover continue after loan tenure end (cover till 100yo) |
| - Can finance into loan but need to pay interest | -Cannot finance into loan therefore no need to pay extra interest |
| - No Guaranteed to settle outstanding balance (because Outstanding balance affected by BLR fluctuation but MRTA amount no) | - Guaranteed can settle outstanding balance (MLTA amount always > Outstanding balance) |
| - High initial premium (Higher premium according to aging) | - Lower initial premium (Premium fixed even aging) |
| - No installment (One time payment) | - Can pay by monthly installment |
| - No benefit paid upon diagnosed of 36 critical illness | - MLTA amount will paid to settle loan upon diagnosed of 36 critical illness |
| - An expense/a liability | -An investment/an asset |
| - No tax relief | - Tax relief RM7,000 |
Source from http://housingloan.com.my
Source from http://www.horlic.com
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