Home Insurance When you buy a House – MRTA or MLTA which one you should choose?

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What is Home Insurance

When you buy a home, your loan duration could go up to 35 years! So getting home insurance will provide you with additional protection, in case anything were happen to you before your loan is 100% paid off. Home insurance is used to safeguard against:

  1. Death / Accidents – Insurance to ensure your home loan is paid off in the event of death or serious accidents.
  2. Disaster / Theft – Insurance to reimburse you for any damage to the structure/contents of your home, or theft of any listed items.

What Types of Home Insurance Are There?

There are 2 main types of home insurance: MRTA and MLTA. Let’s take a look at the differences!

Mortgage Reducing Term Assurance(MRTA)Aspect to compareMortgage Level Terms Assurance(MLTA)
Included in your home loanHow it’s charged?Separated from your home loan.
Dependent on age, gender, and othersHow the premium calculated?High premium depending on age
Secure home loan repaymentWhat do you get from this?Secure home loan repayment +
cash benefit( if applicable)
Those with few dependentsWho is it ideal for?Sole breadwinner of the family
One lump-sum or include it into your home loan
Charge is included into your home loan, and can be paid 100%
at once or as part of your monthly installments
How to pay for this?Paid on a monthly, quarterly,
semi-annually, or annual basis.
Charge will be separated from home loan, and there are
many timelines available for repayment.
MRTA and MLTA comparison.

Note*: For MRTA, if the loan borrower passed away while the home still under construction, things will get very complicated. So make sure that you have a will stating who will be inheriting your home.

Having a will stating who will inherit your home is important in the context of a Mortgage Reducing Term Assurance (MRTA) policy because it helps clarify the ownership and distribution of the property in the event of the borrower’s death during the construction phase.

Here’s why it is crucial:

  1. Clarity of Inheritance: Without a will, the distribution of assets, including the home under construction, may be subject to legal complexities and uncertainties. A will clearly states your intentions regarding the inheritance of your property, making it easier for your heirs to navigate the legal process.
  2. Designating Beneficiaries: By specifying in your will who will inherit the home, you can ensure that the property is passed on to the intended beneficiary. This prevents any potential disputes or conflicts among family members or other parties regarding the rightful ownership of the property.
  3. Protecting Your Investment: The construction of a home involves significant financial investment. By clearly stating your intentions in a will, you can protect this investment by ensuring that the property is transferred to the appropriate individual or entity who can continue the construction, manage the loan, or make decisions regarding the property’s future.
  4. Smooth Loan Settlement: In the unfortunate event of the borrower’s death, a clearly defined will help the family members or beneficiaries in settling the outstanding loan associated with the property. It provides a roadmap for how the loan should be handled, potentially avoiding complications or delays in loan repayment or foreclosure proceedings.

By having a will in place that explicitly addresses the inheritance of your home, you can provide clarity, minimize legal complexities, and ensure that your wishes regarding the property are respected. It is advisable to consult with a legal professional to draft a comprehensive and legally binding will that reflects your intentions and protects your assets.

The choice between Mortgage Reducing Term Assurance (MRTA) and Mortgage Level Term Assurance (MLTA) depends on your specific needs and preferences. Both types of insurance serve different purposes, so it’s important to understand their differences before making a decision. Here’s a brief overview of each:

  1. Mortgage Reducing Term Assurance (MRTA):
    MRTA is specifically designed to cover the outstanding balance of your mortgage loan. The coverage amount decreases over time in line with the reducing outstanding loan balance. If you pass away during the mortgage term, the insurance payout helps settle the remaining mortgage debt, ensuring that your family or dependents can keep the property debt-free. MRTA is generally more affordable compared to MLTA since the coverage amount decreases over time.
  2. Mortgage Level Term Assurance (MLTA):
    MLTA provides coverage for a fixed sum throughout the entire mortgage term. The coverage amount remains constant, regardless of the outstanding loan balance. If you pass away during the mortgage term, the insurance payout provides a lump sum to your family or dependents, which they can use to settle the mortgage debt or for other financial needs. MLTA offers a higher level of coverage but tends to be more expensive compared to MRTA.

Factors to consider when choosing between MRTA and MLTA include:

  1. Affordability: MRTA generally offers more affordable premiums since the coverage amount decreases over time. If your primary concern is cost, MRTA may be a more suitable option.
  2. Coverage Needs: If you want to provide your family or dependents with a fixed sum of money to cover the mortgage debt or other financial needs, regardless of the outstanding loan balance, MLTA may be more appropriate.
  3. Financial Goals: Consider your overall financial goals and priorities. If your main objective is to protect your family from the burden of mortgage debt, MRTA can be a suitable choice. If you want to provide additional financial security or inheritance for your loved ones, MLTA might be more suitable.
  4. Personal Circumstances: Assess your personal circumstances, including your age, health, income stability, and the size of your mortgage loan. These factors can influence the affordability and availability of insurance options.

It is advisable to consult with a financial advisor or insurance professional who can evaluate your specific situation and guide you in making an informed decision based on your needs, budget, and risk tolerance. They can provide personalized recommendations and help you choose the most suitable insurance option for your mortgage protection.