Saturday, December 1, 2012

Only MRTA? You May End Up Losing Your House!

MRTA is defined as a term insurance that helps cover the outstanding amount of home loanprovided by a financial institution in events of permanent disability or death of a particular borrower. Before proceeding, keep in mind that MRTA is normally calculated to meet the outstanding loan amount

What happen is after you buy a house, the mortgage agent will normally ask you to buy a bank MRTA. They will advise you to financed into the loan and you will only pay a little bit extra per month. Sounds fantastic!

You overlooked that buying MRTA may not able to fully protect your asset and your family!

Oh, when you bought MRTA, the beneficiary is the bank. If you passed away or suffer from TPD, the bank get the mortgage outstanding balance from the insurance company (of your MRTA policy) and the bank is safe.

So what happen to your house? Wait... common answer will be, "My family gets it lah!"

Your house will be frozen under the estate, your asset will then be used to settle other liabilities such as clearing income taxes (which include any outstanding and uncleared taxes), settle legal expenses, clearing debts from creditors (credit cards) and etc.

After that, if your asset is larger than your liability, your family will then receive the asset. Otherwise, your estate will be declared insolvent or commonly known as bankrupt. Your family will be required to leave the house even though the insurance benefit from MRTA has been paided out. Sounds unfair?

MRTA protects the bank, you and your family are only being protected - with condition.

If you opt for a personal MLTA / Life Insurance, the beneficiary is your family (or whoever you named). Should any mishap happens, your family will get the insurance claim equal to the value of the house (or an amount agreeable at the point of sale). Best part is, proceed from insurance claim is creditor proof and will not be frozen!

Oh, the house will still be frozen of course as it is subject to the same estate execution process.

2 things will happen:

i) If your asset is lesser than your liability, your family have at least the money from the insurance claim. They can buy a new house now.

ii) If your asset is larger than your liability, your family can keep both the house and insurance claim!

Make sense?

Good news! If you decided to move to a bigger house, ONLY your Life Insurance can be used for your new loan.


  1. Thanks for sharing this piece of great info!


  2. It's my first time to hear about MRTA. and It sounds so interesting. I will definitely check this out.

  3. This is interesting.. i did not know about this MRTA until now....

  4. oh dear. the way you made it sound so important here.. i have had my fair share of paying for mrta.

  5. I have never heard of this before. But this article made me realize how important it is to have insurance. I should start looking into investing in an insurance policy.

  6. I have never heard of MRTA before, but this article opened my eyes to the importance of insurance. I definitely want to know more about it

  7. Good information. I have known that banks force us to buy an insurance in case of death or disability, when we take out a home loan. Never found out what sort of insurance that is.

  8. This makes me think twice whether I should get MRTA or not the next time I purchase a house. Interesting things to consider.

  9. Omg, this is an really interesting article. I didn’t know about it beforehead. Thanks for the information.

  10. Thank you for sharing this. This is very helpful.

  11. This is a good sharing about house insurance! I used to work in insuranve line for 8 yrs and still I coukd say this is one most important point!


  12. Thanks for this information. We need insurance for our house to protect our home and investments.