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What is Home Insurance? Should I Get It?

Key Points

  1. What is home insurance?
  2. Differences between MRTA and MLTA.
  3. Types of home insurance.
  4. Is it compulsory to purchase home insurance?
  5. Insurers that offer home insurance.

Nowadays, insurance plays a huge role in our lives. In everything that we do, we need to have insurance coverage to protect us as well as our beloved ones. But, most of us might have overlooked the importance of home insurance in Malaysia. Can you imagine if it took you many years to save up just to buy your dream house, and at one point, your house caught fire or was damaged by anything unexpected? What would you do then?

Did you know that the repair cost isn’t as cheap as you think, as it will cost you thousands of ringgit? That is why, if you have taken the home insurance policy, at least it can help to lessen your financial burden, but at the same time, you know that your house is protected.

What is home insurance?

Most of us might think wrongly or be confused about home insurance and home insurance loans, Mortgage Reducing Term Assurance (MRTA) and Mortgage Level Term Assurance (MLTA). Actually, these are pretty different from one another. To simplify, home insurance will cover losses and damage to an individual’s home and assets. And for this, home insurance can be divided into three types: houseowner policy, householder policy, and basic fire policy.

For mortgage insurance, we can divide it into two types: Mortgage Reducing Term Assurance (MRTA) and Mortgage Level Term Assurance (MLTA).

Mortgage Reducing Term Assurance (MRTA) can be defined as a type of home loan insurance where the sum insured is designed to reduce over the term of your home loan. If anything happens to you before your tenure years, the payout will be based on the actual outstanding loan amount. When your tenure is over, you will not get any money back after paying off the loan; the beneficiaries will only receive the home.

However, Mortgage Level Term Assurance (MLTA) differs slightly from MRTA. It is a type of home loan insurance where the sum insured remains level throughout the term of the plan. The best thing about this mortgage home loan is that if you make a claim (before your tenure years), the payout will be the same amount in the year. MLTA is quite another. When your tenure is over, the beneficiaries will receive the home and the cash.

Differences between MRTA and MLTA

Mortgage Reducing Term Assurance (MRTA)Mortgage Level Term Assurance
(MLTA)
Purpose
The sum insured will gradually decrease with the loan tenureThe sum insured remains the same on a fixed level sum insured
Premium payment
You need to pay in lump sumYou can pay by periodic (annually, monthly or self-financed)
Transferable
NoYes
Payout
The payment will be issued to the bankThe payment will be given to you or your beneficiaries
Financing
Financed into home loanSelf-financed
Claim
The remaining amount will be paid to the bank and the beneficiaries will receive a home onlyThe remaining amount will be paid to the bank and the beneficiaries will receive a home and cash
Nominee
Nominee assigned to the bankNominees assigned to you or your family

Types of home insurance

Technically, home insurance comprises three types: homeowner policy, householder policy, and basic fire policy. Each of these insurance policies has different characteristics and coverage.

  1. Homeowner policy will cover the outside of your house, such as protecting your house structure, including the walls, roof, fixtures and fittings, garages, gates, and fences.
  2. Homeowner policy will cover the loss or damage to the physical building or contents of your building, excluding buildings under construction, from various occurrences.
  3. Basic fire policy will cover your building and/ or contents from loss or damage caused by fire and lightning. Besides that, you can also include special perils like storms, floods, earthquakes and others in your extended coverage.

However, if you are wondering how to calculate the sum insured of your house, you can use this Building Cost Calculator (BCC). This calculator will estimate your property’s rebuilding cost but does not guarantee the actual amount. But if you are unsure, you can refer to the property’s professional valuer.

Is it compulsory to purchase home insurance?

Home insurance is not compulsory for all residents in Malaysia. Still, some mortgage lenders may require you to take out a mortgage insurance policy for your home loan. But, it is recommended that you get this home insurance to protect your house from unforeseen events. Because nowadays, the world is different from back then, it is always best to stay cautious and be prepared.

Insurers that offer home insurance

Don’t worry! In Malaysia, several companies offer home insurance plans for all of you. Bear in mind that each of these insurance companies might have different coverage and rates. Make a comparison for each insurance company before deciding on one. These are the companies in Malaysia that offer home insurance.

You have a tonne of other options as well.

Verdict

Even though home insurance is not compulsory, it is advisable and recommended if you can get one. As mentioned earlier, nowadays, the world is different from back then. We wouldn’t know what would happen, whether in the house or outside the house. That is why, if you can afford it, get home insurance immediately! Not only will you get compensation from your insurance company, but knowing that your house is being protected is such a relief.

Related: Mortgage Insurance: MRTA vs MLTA | The Differences of Mortgage Insurance and Life Insurance

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