How to Protect your Home Loan in Malaysia?


If you are a property owner in Malaysia, chances are you have a long-term loan with one of the banks or financial institutions. This is a huge financial commitment in order to have a roof over your head. Some loans go up to 35 years before you finally own your home fully.

These are risky times

Owning a property is very straightforward but not everyone is aware that you need to protect your investment in case something happens to you and the loan is still many years before completion. More than 50% of Malaysians feel that they do not need to be protected. In the last 5 years, the penetration rate for life insurance is only slightly above 50%. This shows that Malaysians at large are still very ignorant in acknowledging the importance of life insurance what more when it is something more, like a mortgage life insurance.

Why do you need mortgage life insurance?

To know why you need mortgage life insurance, you need to know the consequences if something happens to you. While it is a good thing to have a home, your inability to settle the loan (due to reasons such as death or total permanent disability) will only burden your family. Hence, a mortgage life insurance will help tremendously. What it does is your dependents will not have to carry your debt and the insurance coverage will pay off what is owed. In most cases, the financial institution would tie you up with a policy of this kind when you obtain the loan.

Is that the only type?

There are actually 2 types of such policies namely MRTA or Mortgage Reducing Term Assurance and MLTA or Mortgage Level Term Assurance. They both do sound similar, don’t they? What do you need to know and which one relates to you more?

  • First, the MRTA is a plan where the sum decreases over a period of time. Logically this is so because your amount owing to the bank decreases over time. It is a common plan that the bank that gives you the loan will make you buy.
  • Meanwhile, you can opt for a slightly different plan like the MLTA. This is generally a life insurance plan that comes with some form of protection and financial assistance if you are not around. Such plans are normally offered by most insurance companies which you can buy separately.

Choosing the right plan

With both these mentioned, which one should be more suitable? If you have been buying some form of life and medical insurance for some time now, then the MRTA (provided with the bank loan) will be sufficient. This is also good if you are do not have many dependents as it only pays the home loan. Take note that the MRTA is designed to cover the losses that the bank incurs from your loan and does not cover your family members in any other way.

The MLTA meanwhile is designed to give you and your family more financial protection if something untoward happens. Since it has cash value when the policy matures, this is the one you need if you want to protect your family from debts and some financial assistance if you are no longer around. It works very well as a safety net for your family and one which would surely be useful especially if you have a very long-term loan.

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