A 30-year-old buys an investment property for RM500,000 with a 35-year mortgage of RM450,000, at an interest rate of 3% per annum. The individual plans to hold onto the property for 10 years and then sell it to realise the capital gains.
If they had opted for an MLTA, and it is a full-fledged term assurance, they can choose to either continue to service the policy as a family protection plan or to discontinue it altogether. If they choose not to continue the policy, they will not receive a single sen from it as the premiums paid to the insurer are solely for protection.If the investor dies prematurely, the sum assured will first be used to settle the outstanding mortgage owed to the bank.
Instead of paying the bank, the sum assured is paid out to the beneficiaries, who can then decide if it is better to settle the loan in full or to continue to pay the mortgage on the investment property.If the investor opts for a 35-year MRTA, 35 years’ worth of premiums must be paid one-shot in full, and the premiums are embedded within the original mortgage, especially if they choose not to make the payment in cash.Simply put, the investor will incur interest expense on the MRTA premium.
They can choose to pay a little extra to have 25% of the life coverage, or RM112,500 , paid out in advance if they are diagnosed with any one of the defined critical illnesses such as cancer, heart attack, stroke, or coronary artery bypass surgery. This gives the investor some cash support to service the mortgage while recuperating from the illness.