House Loan Protection - MRTA or MLTA

[KC Tan]

HI ALL,

As we all know buying a house is not an easy matter especially many of us borrow
from the financial instituitions to own our dream property. However, there is a risk if
one day things not going well to us and who will protect our dreams and loves one?

Below comparison are just base on my knowledge in Malaysia market product. Any suggestion please feel free to give your idea/advice base on your experience.


Thanks!


MRTA (Traditional method)

The Pros:
2. Be able to finance premium sum into house loan
3. Benefit if FULLY utilised loan period
4. Cheaper in terms of money value


The Cons:
1. Coverage will decrease according to loan duration
2. Interest charge base on BLR(fix or fluctuate) if finance into loan
3. Need to re-purchase if loan refinance (Not transferable to another loan)
4. Amount PAID Non-refundable after premium expired (Eg: 30 yrs)
5. One lump sum premium payment (No installment/monthly)



MLTA (aka Investment Insurance/Life Insurance/ Multi Loan protection)

Pros:
1. Payable monthly/half yearly/yearly
2. Coverage will be fix for whole loan duration
3. Transferable to another loan (Eg: If Loan A fully paid, Loan B still be able to use)
4. Personal Tax Deduction
5. Coverage included 36 Critical Illness (If A diagnose with one of the 36 illness, FULL sum insured given immediately)
6. May top up or reduce your sum insurred at any time
7. May make withdrawals at any time with minimum balance RM 1-2k
8. Coverage to age of 100 yrs old (From all insurance company) (Eg: If A died/disable at age 100 or earlier, the beneficiary will get the insured sum NOT remaining House loan sum)
9. Premium paid is part of savings(Cash back) and potential higher return due to investment


Cons:
1. Expensive
2. Surrender value at short period will make lost
3. A person plan for 1 property might not benefits
4. Anyone can think of it please suggest?

[place]

well the significant difference would be MLTA covers not only the loan pay offs but also the life assurance of the principal hence heftier premiums.... while MRTA only covers for the loan pay offs...

so if one can afford MLTA would be a good choice...else MRTA is as sufficient for its base purpose...

[jutamind]

if u think u can pay off the loan within 10 years, why not buy term insurance for 10 years term limit? much cheaper option

[place]

yeah...that's wat many bankers / agents advice.... but no one could tell the future wat if one didn't manage to pay up the loan in 10 years...and something happen after that?

:)

[jutamind]

if u couldnt settle the loan after 10 years, then take another 5/10 year term insurance and u can terminate the term insurance as and when you need it.

[place]

yeah but by then, you are also 10 years older...hence, ur premium would cost wayy more too...even for a short or long term addition :)

[Bee]

critical illness does not cover in term brother....risky too :-)

[KC Tan]

Bro, 36 critical illness do counted in life insurance. It does not cover the critical illness Medical Treatment only. Its not that either you are dead/accident or permanent disable only they pay the sum insured.

[Bee]

based on this point "Amount PAID Non-refundable after premium expired (Eg: 30 yrs)" the amount is refundable if you managed complete your installment with in 30 years. Example. if you pay-off your housing loan like 10-15 years. This need to check with then bank who sold you the MRTA.

[Bee]

basically MRTA & MLTA work like this

MRTA : for those who already owned other life insurance policy.

MLTA : for those who dont have any life insurance policy. another pros of this insurance is, if the policy owner died due to accsident, then the amount will be twice.

[KC Tan]

Well, base on my opinion i dont think MRTA its a good buy for those professional youngster.

Eg: For my own house i need to pay RM 25k++ for my MRTA, while i only pay RM 150/month for RM 400k sum insured till 100 age.

If you can throw a stone at 2 birds, why dont take MLTA?

[Esther]

KC, what is the insurance plan that u pay for RM 150/month ? does it cover 36 critical illness? from which insurance company or bank?

[KC Tan]

Prudential Life. It depends on your age, health risk(Eg:Smoker,Non Smoker) and your occupantion job risk.

If you diagnose one of 36 illness, that will be your CASH jackpot....lolz..touch wood!