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How To Insure Your Home Loan: MRTA or Insurance

MLTA?
by Michelle Brohier
You can insure anything these days, from your car or bike to your
onJune 17 2014
home contents or holiday, but did you know you can insure your
mortgage too? Read our basic guide to MRTA and MLTA and find out
which option is best for you.

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But we digress. If youd like to insure your mortgage and Your Life
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when you pass on; this is the product for you. But as with any
kind of insurance; mortgage insurance also come in different

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types. At present, there are two: the Mortgage Reducing Term Senior Graphic
Assurance ( MRTA) and the other one is the Mortgage Level Designer
Term Assurance ( MLTA).

Here's the lowdown on the two.

Strategic Business
Development
MRTA vs MLTA Consultant

To start you off; we made a super simple chart to show you the
differences between the two insurance types. Though the Head of Sales
purpose is the same; youll notice they are creatures quite
different.

Find More
MRTA MLTA

Purpose Protection Protection, Savings

and/or cash value

Coverage Covers the Covers the

outstanding outstanding
housing loan on a housing loan on a
decreasing sum fixed level sum
assured basis assured basis

Payment Lump sum payment Paid periodically on

by cash or financed a monthly,
into housing loan quarterly, semi-
annually or annual
basis

Total Premium Lower Higher

Nomination Bank is the Anyone can be the

beneficiary beneficiary

Transferability No Yes

Suitable for* Where buyer aims Where buyer is

to own the house in expected to sell the
a longer term house in short-term

*The line on suitability is just a suggestion. As always, youre

welcome to choose whichever makes you comfortable. After all,

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insurance is supposed to make you feel comfortable in the

event of a calamity.

Do I even need mortgage insurance?

This is a tricky question for sure. Do you need life insurance?
Do you need personal accident insurance? For the many of us
viewing the glass half-full; these events are either very remote
(permanent disability) or really far off (death) so there is truly
no need for mortgage insurance. When we have passed on;
loved ones can either continue paying the loan or sell the
house to repay if necessary. In the best of situations; we would
have paid the house loan in full by the time we meet our maker.

But as the realists know; life hardly ever works according to

plan. Who knows what tomorrow holds? The very premise of
insurance depends on us not knowing when disaster will strike
and if you are the kind to feel antsy you could definitely do
with such a policy.

Property agents will of course encourage you to take it. Its a

great policy for them too as it ensures they will get paid no
matter what happens to you. But even during a hard sell on the
benefits of the policy and the guilt trip about leaving your loved
ones peace of mind: always remember that the sole decision
rests with you.

Do I have to decide when I buy my house?

The simple answer is no. Insurance agents and banks will always
be happy to sell you a policy later in your mortgage if you didnt
buy one on the outset. Why would they turn away a paying
customer? But there are of course things to remember when
putting off purchasing a mortgage insurance policy:

1) If paying for MRTA which requires lump sum payment can

you afford this? Many who take MRTA upon application of
their home loan will add the additional premium lump sum
into their loan amount to help pay for it. Since you cant do
that later on you must have the full amount on-hand.

2) Does not having mortgage insurance make you

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squeamish? Some people just like having insurance and not

having a policy even for a short time makes them nervous. If
youre such a person can you stand having a mortgage but
not a mortgage insurance policy?

Once youve made a decision; its on to the next question

which one should you choose?

Which one is better?

There are two salient differences to note between the MRTA and
the MLTA. The first being that the MRTA will pay out based on
the amount still owed to the bank and the MLTA will pay the
exact amount agreed in the policy no matter how much you
owe (this is usually more than the amount owed and based on
the value or purchase price of the property). The second
difference is that the MRTA requires only a single lump sum
premium payment whilst the MLTA will be recurring yearly.

There are two ways of looking at this selection: MLTA is great

because not only will you receive the amount you need to repay
the bank but a little extra which works as a cash value. But
because MLTA premiums are repetitive; youll definitely be
paying more in the long run than you would for an MRTA. Think
about your loan tenure: is the extra you will pay for an MLTA
justified in the event of a pay out? MRTA on the other hand is
great if all you want to do is to secure your mortgage. Its the
bare minimum in mortgage insurance and itll definitely do the
job but itll give you little else. Still, its a single premium
payment and is easier if you dont expect to have a good
enough cash flow to keep paying premiums every year.

Also remember that MRTA is non-transferable meaning it is

tied to this house during this financing period. Should you
choose to sell; you cannot take your policy with you to the next
property you purchase. The opposite is true for the MLTA which
is a policy that follows you (if you so want it to!).

When it comes down to it, which is better will depend on you. If

you want a bare minimum policy just to secure your house this
time around the MRTA is the choice for you but if you want
something a little extra; the MLTA will be a better option.
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In truth, the policies have so many important distinctions that

its not really possible to say either one is better than the
other. As always, after informing you of the distinction; the best
thing you can do is make the decision based on your needs.

4 comments
Agree or disagree with this post? Questions? You also have your word!

Kangkung Eater @ June 17, 2014 at 22:30

^
I don't understand the table. The table says Nomination - bank is beneficiary, or
anyone can be the beneficiary. What does that actually mean?
Reply

Michelle Brohier @ June 25, 2014 at 16:16

^
The table is actually divided into two, MRTA on the left, MLTA on the right. For
MRTA, the person who benefits from the insurance is only the bank as they are
the only ones to receive the insurance claim. As for MLTA, anyone can be the
beneficiary, meaning your spouse, your children, friends, colleagues or anyone
you nominate will have access to the insurance claim.
Reply

@ September 9, 2014 at 10:37

TY
^
Could you please help to clarify below scenario: If a person who is insured with
MRTA is dead/ TBD during the coverage period, but his outstanding loan amount is
lower than the MRTA sum assured (due to advance payment). In this case, would
the insured family member receive the balance amount (Sum Assured -
Outstanding Loan Amount)?
Reply

Raj @ July 1, 2015 at 17:45

^
Yes
Reply

Write your comment...

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