Home Loan insurance, also known as Mortgage Life Insurance, is a type of insurance that you can buy once you take a housing loan. Basically this insurance will pay the remainder of your housing loan to the bank in the unfortunate case that something happens to you and you are unable to work and earn money. Examples of these are instances of death or total permanent disability.

Housing loans are very long term commitments and therefore there is a need to provide some form of protection for the banks. This also helps to ease the financial burden on your family or loved ones in the case of unfortunate incidences.

There are currently two types of Mortgage Life Insurance available to home buyers, the first is called Mortgage Reducing Term Assurance (MRTA) or Mortgage Decreasing Term Assurance (MDTA) . It has the following features:

1. The amount insured decreases as time goes along.
2. MRTA is paid in one lump sum at the beginning when you take a home loan.
3. It is then incorporated together into the monthly home loan repayment
4. If you successfully pay your home loan, the amount insured becomes zero and the insurance ceases to exist.
5. MRTAs are non-transferrable
6. It charges a low premium
7. In the case of a claim, the insurer will pay the bank whatever is left on your housing loan and you or your inheritors will get full home ownership.

The second type of insurance is known as the Mortgage Level Term Assurance (MLTA) which is basically the same as an MRTA/MDTA but has an added advantage of being also a savings scheme. It incorporates elements of savings and premium returns. In essence, here are the features of an MLTA:

1. Apart from just basic protection, there is cash returns.
2. It is transferrable
3. Premiums are higher than MRTA/MDTA
4. Premiums to be paid periodically, every month or every half a year
5. Beneficiary is the bank and your family/inheritors
6. The amount insured is a fixed value and not dependant on time
7. Usually premiums paid separately from loan repayment
8. In the event of a claim, insurance company will pay the loan balance and your next-of-kin will inherit the house plus some cash savings.

The amount of insurance premiums you need to pay for both of the insurance depends on factors like your age, whether you have illnesses, loan amount, loan repayment period and others. Put simply, you buy the MRTA if you only need basic coverage and have other insurance programmes like health insurance or life insurance

However, if you want extra returns for your inheritors, consider the MLTA as it gives extra cash to your family, especially if something happens when your spouse is not working or your children are still young.

In any case, being covered by insurance is extremely important so that you don’t leave behind a mountain of debts for your loved ones.