MRTA vs Personal Insurance
Today, I received a letter from home loans bank asked me to pay MRTA of my new house in certain amount. Before this, I’ve explained to the bank officer that I already have personal insurance that will cover the house value if something bad happen on me such as death or disability. However, the bank officer refused and mentioned it is responsibility for the bank to ensure their customer follows procedure that National Bank provided. If I’m not mistaken, this MRTA something good to have for the home loan borrower and it’s not compulsory.
Below is definition of MRTA (The Mortgage Life Assurance):
“This type of policy provides for full settlement of the outstanding balance of the housing loan with the financial institution, in the event of total permanent disability or death of the borrower. Premiums can usually be included in the loan amount, and the repayment period of the premium is usually spread over the loan tenure. The premium is only incurred once. There are no monthly or yearly premiums to be paid. In the event of early termination of housing loan, you will generally have the option to request for a refund of the premium for the balance of the unexpired period or to continue the insurance coverage.”
For me as long we have another financial source that can replace MRTA and cover with the same amount, should be OK.
Pros and Cons of MRTA vs Personal Insurance:
MRTA’s Pros: Pay once and the coverage will be continue until you’ve completed to pay the loan.
MRTA’s Cons: The amount that you pay will never return if nothing bad happen on you.
Personal Insurance’s Pros:
1. It’s a saving insurance which your money will be returned to you if nothing bad happen on you.
2. It can be move to any property if you have new one.
Personal Insurance’s Cons:
1. Your commitment is to pay premium on monthly/yearly basis until age reach 60 years old (depends to the policy).
Conclusion:
It’s is up you which one do you prefer to take. If you’re a property investor, Personal Insurance is the best for you. Otherwise, MRTA is your other option.
