MLTA vs MRTA in Malaysia: what's the difference, and which is better?

Both are mortgage insurance: if the borrower dies or becomes totally and permanently disabled, the payout first clears the home loan. The difference is the sum assured. Under MRTA (Mortgage Reducing Term Assurance) it falls with the loan balance. Under MLTA (Mortgage Level Term Assurance) it stays the same for the whole term, so a claim later in the loan pays more than is owed and the excess goes to the insured or a named beneficiary.

What is the difference between MLTA and MRTA?

Is MLTA life insurance?

Yes. Manulife's MLTA, sold through Alliance Bank, is described in its disclosure sheet as a single premium, non-participating group term life insurance covering death and total and permanent disability.

How insurers define "level"

• Alliance Bank's MLTA, underwritten by Manulife: a "level face amount" over time.
• Sun Life's Group MLTA, sold with CIMB loans: the "level sum assured" is paid as a lump sum.
• Maybank's version is called CLTA (Credit Level Term Assurance), underwritten by Etiqa, with a level sum insured throughout the loan tenure.

Is MLTA paid monthly or as a single premium?

Every bank-sold MLTA disclosure sheet we checked is single premium: Manulife/Alliance Bank, AmMetLife/AmBank, Sun Life/CIMB, Great Eastern/OCBC and Etiqa/Maybank. The premium can be added to the loan; Maybank's CLTA allows up to 10% of the loan amount.

You may read online that MLTA is paid monthly and can be carried to your next home. None of these bank-package disclosure sheets says so. The disclosure sheet for the policy you are offered is what counts.

Which is better, MLTA or MRTA?

It depends on what you want the cover to do. If you only need the loan cleared, MRTA's cover already tracks what you owe. If you want any payout above the balance to go to your family, or want cover to carry on after the loan is paid off (some products allow this; see below), look at MLTA. Compare quotes for the same loan amount and term.

Who gets the excess?

• AmMetLife (AmBank): the sum assured goes to AmBank to settle the loan; any excess goes to the life assured.
• Great Eastern (OCBC): the bank receives what it notifies as owed and the balance is paid to you.
• Manulife (Alliance Bank): on a joint policy, the excess goes to the surviving insured, or to the nominee if there is none.

If you settle the loan early

• AmMetLife: cancel for the surrender value, or have the certificate assigned to you. An optional premium refund at maturity is also offered.
• Sun Life MLTT (CIMB Islamic): cover can continue after the financing ends, or you can cancel in writing.
• Sun Life MLTA (CIMB): you can cancel in writing once the loan ends; the surrender value is less than the premium paid.

What is MLTT?

Sun Life Malaysia Takaful's Group Mortgage Level Term Takaful (with CIMB Islamic) and Takaful Malaysia's Takaful myMortgage (with RHB) both offer a level sum covered for a single contribution.

Is it compulsory?

As with MRTA, it depends on the bank. Hong Leong Bank's mortgage disclosure sheet says MRTA, MRTT, MLTA and MLTT are optional unless the letter of offer ties the loan to a package that requires one. See What is MRTA?