What is MRTA, MLTA, MRTT and MLTT in Malaysia
MRTA, MLTA, MRTT and MLTT are all types of insurance policies related to housing loans or mortgages. These are used to protect both the borrower and the lender in case of unexpected events, such as the borrower’s death or total disability. Each one has unique features in terms of coverage and structure.
MRTA (Mortgage Reducing Term Assurance)
- Definition: A life insurance policy that reduces over time, tied to the outstanding balance of a home loan.
- How it works: The coverage amount decreases as the mortgage loan balance decreases, with the goal of settling the loan in case of the borrower’s death or total permanent disability.
- Key Feature: The policy’s value decreases along with the loan, so it matches the diminishing mortgage balance.
- Ideal for: Borrowers who want to ensure the loan is paid off if something happens to them.
MLTA (Mortgage Level Term Assurance)
- Definition: A life insurance policy that provides a fixed sum of coverage throughout the term of the loan.
- How it works: The coverage amount remains constant throughout the loan period, regardless of how much of the loan is paid off.
- Key Feature: Offers more comprehensive protection, providing a lump sum amount to the beneficiary, not just the remaining mortgage balance.
- Ideal for: Borrowers who want a fixed sum of coverage for their family in case of death or disability.
MRTT (Mortgage Reducing Term Takaful)
- Definition: A Shariah-compliant version of MRTA. It’s a type of Takaful (Islamic insurance) designed to reduce over time in line with the mortgage balance.
- How it works: Just like MRTA, the coverage decreases as the loan balance decreases, but it’s structured in accordance with Islamic principles of mutual assistance.
- Key Feature: Decreasing coverage over time, with the pool of participants sharing the risk and benefits.
- Ideal for: Borrowers looking for Shariah-compliant mortgage protection.
MLTT (Mortgage Level Term Takaful)
- Definition: A Shariah-compliant version of MLTA, offering fixed coverage throughout the loan term.
- How it works: The coverage remains level for the entire duration of the mortgage loan, and it’s based on the Takaful model.
- Key Feature: Provides a fixed sum of coverage that doesn’t decrease over time, ensuring a lump sum payout to beneficiaries in case of the borrower’s death or disability.
- Ideal for: Borrowers seeking a Shariah-compliant, fixed coverage policy that offers a lump sum payout.
Summary
| Type | Coverage | Decreases Over Time? | Shariah-Compliant? | Ideal for |
| MRTA | Mortgage balance | Yes | No | Borrowers who want to cover the loan balance |
| MLTA | Fixed sum | No | No | Borrowers who want a fixed lump sum coverage |
| MRTT | Mortgage balance | Yes | Yes (Takaful) | Shariah-compliant borrowers needing mortgage coverage |
| MLTT | Fixed sum | No | Yes (Takaful) | Shariah-compliant borrowers seeking fixed coverage |
Each of these insurance products can be selected based on your needs—whether you prefer decreasing coverage tied to the mortgage balance or a fixed sum for your beneficiaries. Additionally, MRTT and MLTT are ideal for those seeking a Takaful solution.
