Mortgage Level Term Assurance (MLTA): Fundamentals

Assurance which provides financial protection in the event of premature death or total permanent disability on a level term life basis. Most of the time, medical examination is not require if sum assured is not significant and age below 45. If require, such expenditure will be paid by the company. Basic traits are similar to MRTA.

Coverage

. Death

. Total permanent disability

. Critical illness (optional / depends on individual assurance's coverage)

Premium payment option:

. Single premium

. Premium could be amortized / financed into a mortgage ( will increase the cost by 50% ~ 100% depending on the tenure of mortgage)

Basic mechanism

. Sum assured of MLTA is leveled throughout the covered period.

. Advisable to insure at initial loan amount.
. Major advantage of MLTA over MRTA is that, it mitigates the risk of insufficient sum assured during the time of interest rate goes beyond the protection barrier by having a non-reducing sum assured throughout the protection period. (for more elaboration on such risk, please refer to MRTA session)

. A simple chart below shown the MLTA's coverage (In blue) and mortgage outstanding (in pink) throughout the tenure

Mortgage: -Tenure: 30 years, Loan amount: 300k

MRTA: Protection period: 30 years, Sum Assured throughout the tenure: 300k

Estimation of premium payable

Age: 25, Tenure: 30 years, Sum assured: 300k, Rate: 9%, Single premium RM 10,780

Age: 35, Tenure: 30 years, Sum assured: 300k, Rate: 9%, Single premium RM 24,130

Common Misconception & Misleading

. Quite a great number of agents exploit insufficient financial understanding of borrowers by providing misleading idea. They tend to promote common life insurance products / savings products / investment linked products to borrowers and named the products as "MLTA" but in fact, the products are not MLTA.

Although insurance products above do show a similar protection and coverage like MLTA, its variety, flexibility to customize its coverage (ie. bringing in medical card as rider, so forth) and length of protection period is far greater than a standard MLTA. All of such customization and greater coverage imply a greater cost of insurance, thus, insurers have to pay more premium, most of the time, a couple of hundreds on monthly basis.