It is easy to forget that the buying of a property involves more than simply the listed price. Going the additional mile and guiding your clients through all elements of their new purchase demonstrates that you care about their investment as a property agent.
When purchasing property in Malaysia, it is important to understand the different types of insurance available. This guide will break down the differences between MRTA/MRTT and MLTA/MLTT, so you can advise your clients better.
What Are MRTA and MRTT
These acronyms may seem unfamiliar, but they are important things that property agents should be aware of when working in the Malaysian market. MRTA stands for ‘Mortgage Reducing Term Assurance’, while MRTT is ‘Mortgage Reducing Term takaful’.
Both of these policies offer protection to debtors in the event that they can not make their property loan payments. Let us take a closer look at what each policy offers, and how agents can help their clients choose the right one for them.
MRTA or Mortgage Reducing Term Assurance
MRTA or Mortgage Reducing Term Assurance is essentially a safety net for everybody who has a property loan. The greatest challenge facing the debtor’s family members in the case of death or total disability is their ability to repay the outstanding debt.
In many cases, the debtor’s family members may be forced to sell the property at below market value to pay off the debt. Because it covers part or all of the outstanding amount of a property loan, family members will not be left with such a burden if they sign up for MRTA.
Property loan applicants in Malaysia do not have to locate a provider because MRTA is frequently included in the application process. In most cases, a debtor will only have to pay a single premium and will not be required to pay another premium for the length of the insurance.
MRTA has a defined insured amount as well as a policy period. If the debtor dies or becomes permanently disabled, it will only pay out the amount that is covered, within the timeframe specified and it does not cover the whole amount owed to the bank by the insured.
MRTT or Mortgage Reducing Term Takaful
Mortgage Reducing Term Takaful or MRTT is a takaful that covers the debtor on a property if the debtor, suffers total permanent disability (TPD) or dies. Similar to MRTA, it is a safety net that is meant to help the debtor’s family members pay off the debtor’s property loan.
MRTT is a reducing term policy that follows Islamic takaful principles, with the sum insured decreasing as the total value of the debtor’s outstanding loan decreases. This implies that when debtors pay down their property loans, the amount owed to the financial institution will decrease.
MRTT requires a lump sum payment at the start, and MRTT is regarded to be a less expensive alternative than a level term policy like the MLTT. This is owing to the fact that the MRTT payout amount will decrease as the term of the property loan lengthens.
However, the payment will be sent straight to the financial institution that funded the property loan, with no additional money going to the debtor’s beneficiary or dependant in this scenario.
What are MLTA and MLTT
MLTA or Mortgage Level Term Assurance and MLTT or Mortgage Level Term Takaful are other two important types of insurance for property in Malaysia. Both of these products offer comprehensive coverage in the event of death or disability.
While both policies offer similar coverage, there are some key differences between them that you should be aware of before deciding which policy is right for your clients. Here is a closer look at what these policies offer and how they can help protect your clients’ investment.
MLTA or Mortgage Level Term Assurance
Mortgage Level Term Assurance (MLTA) is a form of property loan insurance in which the amount covered remains constant over the course of the policy’s term. That is, it will pay out the same amount in Year 10 as it would in Year 25.
MLTA guarantees a fixed benefit amount for the duration of the insurance. Unlike MRTA, any excess funds are given to the recipient.
Consider the case where debtor MLTA coverage is for RM500,000 and debtor property loan balance is RM300,000. A successful claim would pay the bank RM300,000 to repay the outstanding property loan, with the remaining RM200,000 going to the debtor’s family members.
MLTT or Mortgage Level Term Takaful
Mortgage Level Term Takaful, or MLTT as it is more often known, is an Islamic financing instrument that serves to offer financial help to debtors in the event of death or total permanent disability. It is a life insurance policy with a constant total sum insured for the length of the policy.
The financial risk covered by the financial institution is generally bigger with MLTT since it needs the same amount of payout at any moment during the policy. The overall payment for MRTT, on the other hand, will decrease with time.
Furthermore, the cost of an MLTT insurance policy varies depending on parameters such as age, period of coverage, and the total amount covered.
How Do the Two Types of Insurances for Property in Malaysia Compare
Many people are not sure which type of insurance they should get, so here is a comparison of the two types. MLTA/MLTT is more expensive but it covers the outstanding loan amount in the event of death, so it is a good option for those with a property loan that is high-value.
MRTA/MRTT is cheaper but does not cover the outstanding loan amount in case of death, so it might be better for those who have a smaller property loan. Both types of insurance are important, but it is important to choose the right one for your clients’ needs.
Register Today to Begin Your Career as a Property Agent
Malaysian property market is a lucrative investment opportunity, and with the right knowledge, you can help your clients make sound decisions about their future properties. MRTA/ or MRTT and MLTA or MLTT have their own unique benefits that can help property owners protect their investments.
As a property agent, it is important to understand the different types of insurance for property available and how they can benefit your clients. We want to ensure that you have all the information you need to confidently represent your clients’ interests.
If you want to be a part of Malaysia’s thriving property market, register with IQI Elite Legacy as a property agent. Our team is here to help you get started and provide the training and support you need to succeed in this competitive industry.
Contact us today to learn more about how we can assist you in becoming a licensed property agent in Malaysia.