My Biggest Mistake about MRTA

I believe most of you have seen the graph on above before, showing the major difference between MRTA and MLTA in term of the sum assured. No issue on this right?

“If the MRTA fees for 30 years is too expensive, no worry, it’s flexible, we can adjust it to 15 years or even shorter period for cheaper premium.”

Have you experienced this before? Sound familiar right?

Ok, we go straight to the point: If you have shorten the coverage period to 15 years from 30 years, how much do you think the insurance company will fork out to settle your loan if you die at 13th years (refer to green line)?

Before this, I was misunderstood that the coverage will follow the blue line, which means my total outstanding loan will be covered, as per “Y” figure.

But, I’m wrong! It actually covers a very minimum amount as what you can see from the graph, the “X” figure. The sum assured is even lower, almost nothing, if something goes ‘wrong’ with you in 15th years. You get my point?

So, what’s wrong with MRTA? Nothing wrong with it, it’s about understand the concept correctly, because buying MRTA is part of financial planning for 10 to 30 years in advance.

The only thing I feel unhappy is, none of the mortgage officers I have met explain about it to me when they propose to shorten the coverage period. And of course my own mistake, too, for doing insufficient homework.

P/S: I was explained by an insurance agent, my cousin, this is how MRTA actually works as abovementioned. However, need to get more supporting evidence in black and white clarification from banks and insurance companies. Let’s find out the fact together. Welcome to share your knowledge here!