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The Complete Guide To

MRTA, MLTA, MRTT, And
MLTT In Malaysia
by PropertyGuru Editorial Team
Last updated 22 Mar 2021 • 14 min read
First Home Buyers

Klik sini untuk versi BM.

The words ‘MRTA’, ‘MLTA’, ‘MRTT’, and ‘MLTT’ might sound like rival K-
pop groups, but they’re actually essential types of life insurance cover
for your mortgage!

These products are designed to cover the financial burden of your

home loan in the event of death and/or total permanent disability.
That means if something tragic happens to you, your loved ones have
financial certainty at the moment they need it most.

These four covers all represent a financial safety net for your home
loan. But what’s the difference between the four, and which one might
be the best one for you?

For more first-time home seekers’ tips & guides, follow our PropertyGuru
Malaysia Telegram channel!

FAQs About MRTA

1) What Is MRTA?

Mortgage Reducing Term Assurance (MRTA) is a type of home loan

insurance where the sum insured is designed to reduce over the term of
your home loan.

As you pay off your home loan, the value of your outstanding debt will
fall. MRTA is designed so that the amount that would pay out, at the
point of a claim, covers the total value of your outstanding home loan at
that time.

It’s important to make sure that when you take out MRTA, you correctly
include the terms and value of your home loan.

If the amount insured in MRTA is less than your home loan at the point
of claim, there could be a gap between what you owe on the home loan,
and what is paid out.
Equally, if you’re insured for more money than is owed on the home
loan, only the amount owed will be paid out to the home loan provider,
with no additional benefit.

2) Is MRTA Compulsory?

MRTA is not compulsory in Malaysia, but it can be mandatory in the

terms and conditions of an individual home loan provider.

That means, while you don’t legally require this cover, the bank offering
you a home loan may insist you take it out to cover the value of the
loan.

3) How Much Does MRTA Cost?

The cost of MRTA depends on a number of factors such as your age,

the value of your home loan, and the length of your home loan. The
cover is paid for with a single lump sum at the beginning of the policy.

Insurance is all about assessing risk. The older you are, the riskier you
are (sorry). The higher the value of your home loan, the higher the
financial risk. You get the idea!

If you’re uncertain about whether a policy is good value, the best choice
is to compare different quotes from different providers. If in doubt —
speak to a financial professional.

4) Is MRTA refundable?
No. In the event of a payout, the money is paid to the bank. That means
the MRTA will cover the total value of the home loan, with no financial
refund or benefit to any third party.

It’s a cover designed to pay for a home loan, and that’s exactly what it’ll
do!

FAQs About MLTA

1) What is MLTA?

Mortgage Level Term Assurance (MLTA) is a type of home loan

insurance where the sum insured remains level throughout the term of
the plan. That means it will pay out the same amount in year 10 as it
would in year 25.

MLTA provides a defined benefit amount during the entire period of the
policy. Unlike MRTA, any additional amount is paid to the beneficiary.

Take the scenario where your MLTA cover is for RM500,000, and the
outstanding amount on your home loan is RM300,000.

A successful claim would pay RM300,000 to the bank to cover the

outstanding home loan, with RM200,000 paid out to the beneficiary of
the policy.

2) Is MLTA Compulsory?

MLTA is not compulsory in Malaysia, but home loan providers could

make it a condition of receiving a home loan.
That means while it’s not legally compulsory, you might struggle to find
a home loan that doesn’t insist you have some form of life insurance
cover for your home loan.

3) How much does MLTA cost?

Like MRTA, MLTA is assessed based on factors such as your age, the
value of the insured amount, and the term of your policy. Insurance
premium payments for MLTA are made in instalments throughout the
term of a policy.

Since the amount insured in MLTA doesn’t decrease over time, the
financial risk to the provider is far greater than a reducing term cover
like MRTA.

That means MLTA premiums (for a similar insured amount) are likely to
be significantly higher, compared to the MRTA. Let’s take one simple
example comparing the cost of MRTA vs MLTA:

Age – 28
Home loan value – RM450,000
Interest – 6%
Insurance term – 30 years

As you can see in the table above, that’s a big difference between the
cost of these covers!

4) Is MLTA refundable?
Any additional insured amount, above the value of the home loan, is
paid to the beneficiary at the point of claim.

That means if your outstanding home loan is RM300,000, and your

insured amount under MLTA is RM500,000, your beneficiary will receive
RM200,000, while the RM300,000 directly goes to the bank to cover the
home loan.

That’s an extra level of financial support and certainty in the event that
the insured individuals die, or suffer total permanent disability.

PropertyGuru Tip
You can read our dedicated guide that compares the difference
between both —

MRTA vs MLTA: Which Is The Best For You

FAQs About MRTT

1) What is MRTT?

Mortgage Reduction Term Takaful (MRTT) is a reducing term life

insurance product that follows the takaful principles of Islamic finance.

It’s basically an insurance plan to cover the cost of a home loan, in the
event of death or total permanent disability.
Like MRTA covers, the sum assured for an MRTT is designed to reduce
as the total value of your outstanding home loan also reduces.

As you pay your home loan, the amount owed falls, and an appropriately
arranged MRTT is designed to fall, in line with that figure.

It’s important to make sure the term and sum assured are set up
properly at the start of this insurance.

That way, you can be confident that the outstanding loan and sum
assured match during the term of the policy.

2) Is MRTT compulsory?

MRTT, like other similar covers, is not mandatory. Some home loans will
require you to have a life insurance product in order to cover the total
amount of a loan, however.

3) How much does MRTT cost?

There’s no guaranteed set cost for MRTT insurance. The cost of the
policy will be based on risk, which is increased by things such as a
larger amount covered, longer term on the cover, and the age of the
person taking out the cover.
You should speak to a financial professional if you’re not sure which is
the right cover for you. Now, MRTT will be cheaper than a similar level
term policy.

This is because while the amount paid out at the point of claim for
MRTT is reducing through the period of the home loan, the value
assured remains the same for level covers.

The payment for an MRTT cover is made in one lump sum at the
beginning of the cover.

4) Is MRTT Refundable?

Payment of a successful claim on an MRTT policy is made directly to

the bank that financed the home loan. No additional money is paid out
to individual beneficiaries.

That means if the outstanding value of your home loan is RM100,000,

and your MRTT sum assured is RM110,000 at the point a claim is paid,
only RM100,000 will be released.

This sum of money will go directly to the bank. You’ve essentially paid
for higher cover that you don’t need!

FAQs About MLTT

1) What Is MLTT?

Mortgage Level Term Takaful (MLTT) is a life insurance cover designed

to provide financial support in the event of death or total permanent
disability.

The total sum assured in this cover remains level throughout the period
of the cover. MLTT is an Islamic finance product that provides certainty
as to how much will pay out throughout the course of the plan.

It sets out a guaranteed payment value, which means the sum assured
that would pay out on a claim is the same in the first year as it is in the
last year of the cover.

2) Is MLTT compulsory?

No, MLTT is not compulsory. However, some banks or financial

institutions may require you to have life insurance to cover the home
loan in the event of death or total permanent disability.

3) How much does MLTT cost?

In terms of MRTT vs MLTT, a level term assurance is likely to be more

expensive than one where the amount paid out reduces over time.

This is because the financial risk for banks is far greater on a cover that
will pay out the same amount at any time of the policy, as compared to
one where the total sum assured reduces over time.

The cost of MLTT is based on factors such as your age, the length of
the cover, and the total amount covered.

The older you are, the longer the term of the cover, or the higher the
value insured, the higher the costs will be.
4) Is MLTT Refundable?

MLTT takaful insurance pays out any additional sum assured directly to
the policy owner or beneficiaries in the event of a claim.

If your home loan is RM200,000, but your insurance is for RM300,000,

RM200,000 would be paid to the bank to cover the home loan, with an
additional RM100,000 paid out to the beneficiary.

If we’re comparing MLTT vs MRTT, the level cover would pay out
additional funds to the individual, whereas the reducing term takaful
pays out only up to the total value of the outstanding home loan directly
to the bank.

Now that we’ve fleshed out the crucial details of each of the four
policies, let’s talk a little bit about the in-demand comparison between
MRTT vs MRTA.

PropertyGuru Tip
Compare MLTT vs MRTT in our comprehensive guide — What’s The
Difference Between MRTT And MLTT Insurance.

MRTT vs MRTA/MLTT vs MLTA

Like MRTT and MLTT, both MRTT and MRTA exist to help you cover the
home loan payment you owe to your providing bank in times of extreme
life difficulties.
They both offer mortgage coverage sums that decrease over time as
you pay off your loan to your bank. So what’s the real difference
between MRTT and MRTA?

The simplest way to think about it is: MRTT is simply a Takaful version
of MRTA, covering a reducing sum on a home loan through the course
of the plan.

The only difference between the two is that MRTT works on Islamic
finance principles (which avoid ‘riba’ or interest-based transactions).

A side-note: the same ‘Islamic vs non-Islamic’ dynamic is true of MLTT

vs MLTA. MLTT is simply a Takaful (Islamic) version of the same type of
level term cover that MLTA provides.

What Are The Differences

Between MRTA, MLTA, MRTT, And
MLTT?

MRTA MLTA MRTT MLTT

Covers

MRTA Death and Total Permanent

Disability.

MLTA Death and Total Permanent

Disability.

MRTT Death and Total Permanent

Disability.
MLTT Death and Total Permanent
Disability.

Sum Covered

MRTA Reducing during term of plan.

MLTA Level during term of plan.

MRTT Reducing during term of plan.

MLTT Level during term of plan.

Policy Payments

MRTA One-off lump sum payment at

start of plan.

MLTA Monthly payments throughout

course of plan.

MRTT One-off lump sum payment at

start of plan.
MLTT Monthly payments throughout
course of plan.

Pays To

MRTA Bank or financial institution

holding the home loan.

MLTA Bank up to the value of

outstanding home loan.

+ Additional funds to
beneficiaries.

MRTT Bank or financial institution

holding the home loan.

MLTT Bank up to the value of

outstanding home loan.

+ Additional funds to
beneficiaries.

Cost

MRTA Single lump sum, can be covered

in home loan. Reflects decreasing
value of payout.
 MLTA Relatively higher long-term cost
as covering a fixed sum assured,
covered by payer in installments.

MRTT Single lump sum, can be covered

in home loan. Reflects decreasing
value of payout.

MLTT Relatively higher long-term cost

as covering a fixed sum assured,
covered by payer in installments.

Islamic Finance Principles

MRTA No

MLTA No

MRTT Yes

MLTT Yes

Which Mortgage Life Insurance Is

Best For You?
Every individual’s circumstances are unique, which means there’s no
clear ‘best mortgage life insurance’ for everyone.
Finding the right cover for you is about assessing the different covers
highlighted above, and identifying which policy will best meet the needs
of your loved ones in the event that the worst happens.

This cover can be a valuable financial safety net in difficult times, so it’s
worth considering even if it’s not a mandatory requirement of your
home loan offer.

It’s better to plan for the worst and hope for the best than going the
other way around. If you’re not sure which cover is for you, then speak
to a financial expert.

Looking to ensure you’ve got all the right information? Check out our
guide on The Complete Introduction To House Insurance.
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