Do I Really Need A Mortgage Life Insurance?

When you taking up a mortgage loan with the banks, the bank officers will recommend you to take mortgage life insurance to protect yourself. Don’t reject it outright as you have no idea how a mortgage life insurance can help your family and your own house if you passed away in sudden incident or total permanent disability (TPD) that caused you’re no longer able to generate income and pay for the house loan repayment.

There is 2 common mortgage life insurance available in Malaysia which is Mortgage Reducing Term Assurance (MRTA) and Mortgage Level Term Assurance (MLTA). These both type of insurance can help you to pay-off the remaining house loan in the event of death or TPD. So, still wonder whether it is necessary to taking any one when buying a home? Continue read on and you will get the answer!

What is the purpose of mortgage life insurance?

Mortgage life insurance is designed to protect your spouse or family from being burdened by home loan repayments if you no longer able to pay for it.

If you have no dependents and you’re single, then you’d be right to question why you need to get this insurance. Well, this is all about clear-off your mortgage loan when you passed away, so if you have no one you’d want the property to go to, then don’t bother. However, if you have a own house and live with your spouse and children, it is a must that you need to take up a mortgage life insurance.

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How a mortgage life insurance can help?

Mortgage life insurance is similar with others life insurance policy which you need to pay a certain amount of premium for it. In the event of death or TPD, the insurance company will pay-off your remaining mortgage loan and your spouse or beneficiaries can then continue to live in the house with debt-free as they need not to worry about making any mortgage payments.

You may think that am I really need to take any mortgage life insurance. Well, if you are plan to pay-off your home loan in the very short period of time, say 3 years, then it is not necessary to taken any mortgage insurance. But, if your loan tenure is up to 30 or 35 years, then it is compulsory that you must buy a mortgage life insurance for protection.

For instance, if you’re buying a property with your spouse, and each paying a 50% of the loan repayment every month. If one of you passed away or TPD, then the other one may face financial difficulties as he/she have to pay a full 100% of the loan repayment every month afterwards. Well, if you having a mortgage life insurance, then it will help you to pay-off the remaining loan amount and this property is still yours or your beneficiaries even if the other person can’t afford to pay for the mortgage loan every month.

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Let’s take another example, you buying a property and live with your spouse and children, and you are the only one person who pay for the loan repayment every months. If in the sudden incident that caused you death or TPD and you doesn’t taking any mortgage life insurance AND the even worst thing that there is still have loan balance is waiting to be settled, then the tragedy will happen on your dependents as the bank will take back your property as their compensation for interests lost.

So now you understood how important a mortgage life insurance is. By the way, I’m not a huge fan of any type of insurance designed to pay specific bills, including mortgage life insurance. The main reason that you buy a life insurance is to minimize the financial impact of you death on your surviving dependents who relies on your income. Do you own research to determine which life insurance company or financial planner can assist you on this topic and buy the appropriate amount of coverage.

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