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Understanding Home Buyer Insurance
It is an insurance coverage to settle the outstanding loan balance of home buyers in the event the borrower passes away or suffers from total and permanent disability prior to settling of the loan.
- Acts as a reducing term assurance life policy mainly to protect those taking a housing loan.
- A scheme where buyers are covered for the amount of loan for the period of the loan.
- In the event of an unexpected death or total permanent disability (TPD), the buyer (or next of kin) is protected and secured for the repayment of the remainder of the loan.
- The lender (usually financial institution) will be the beneficiary of the insurance payout. Family member of policy holder will not be receiving the insurance payout.
- Has a cash value at the end of policy.
- Suitable for those who need additional financial protection and policy holders who may have several financial dependents.
MRTA VS MLTA
| MRTA | MLTA | |
|---|---|---|
| Purpose | Protection | Protection, Savings & Cash Value |
| Protection | Reducing protection through the tenure of loan | Protection is levelled through the tenure of loan. |
| Transferability | Non-transferable on new purchase of property or refinancing. Premium will increase in accordance to age of policy holder. | Transferable. One MLTA can be attached to any loan. Transferable on new property purchase or refinancing. |
| Cash Value | Reducing Cash Value throughout the loan tenure. Cash value diminishes to zero at the end of loan tenure. | Fixed Cash Value (Guaranteed) throughout the loan tenure. Policy holder will attain paid premium in a future date. |
| Nomination | Beneficiary will be the financier. | Anyone can be the beneficiary of the policy. |
| Payment | Lump sum payment or financed into mortgage loan. | Payment mode can be annually, semi-annually, quarterly or monthly. |
| Premium | Low. E.g. One-off payment. | High. E.g. Monthly or yearly payments throughout the loan tenure. |
| If there is no death or TPD | Policy holder gets nothing at the end of loan tenure. | Policy holder will attain an assured sum at the end of the loan tenure. |
| If there is death or TPD | Insurer will pay the loan balance to financier and beneficiary will attain the home. | Insurer will pay the loan balance to financier and beneficiary will attain the home insured and balance cash assured. |