In the UAE, life insurance penetration has been relatively low. This lack of uptake is no doubt due to the primary demographic of the population – expats. Most of the expats that make up the UAE’s workforce are young and therefore feel like life insurance is not something that they need. But in the UAE, where healthcare and the cost of living is expensive, this choice can be hugely detrimental to the financial wellbeing of you and your loved ones. Over the course of the COVID-19 Pandemic, people have discovered just how susceptible you can be to a life-changing illness or accident. With this comes the realisation that life insurance really is a must have.
There are so many policies and life insurance products available, particularly online, that it can be difficult to know which policy to choose. Below, we outline some of the main types of life insurance products and the 5 considerations you need to make before purchasing a life insurance policy.
A Brief Roundup of Product Types.
Term Life Insurance. Term life insurance provides cover for a set length of time. They are life insurance policies and usually don’t have a saving component. They are very flexible, and this can be good for those with evolving circumstances.
Whole of Life Insurance. Whole of life insurance is a life insurance policy that usually has a savings component. The term of this type of product lasts for the duration of your life or, at the very least, to a later age.
Savings products. Savings products usually have a low insurance component and allow investments of various forms over a set term. These types of policy obviously carry a degree of risk as investments are prone to market fluctuations. But these products can be good if you have a particular goal in mind.
Critical illness. These policies pay a lump sum in the event that you are afflicted with a debilitating illness. They are good to help with the costs of healthcare or to subsidise for income in the event that you are unwell for a prolonged period of time. At IAE, we often recommend that clients have critical illness cover on top of another policy, if it is not already included in their existing insurance product.
Five Considerations For a Life Insurance Policy.
Understanding Your Needs.
Understanding your specific needs is the most important thing to do before setting out on any financial venture. What people often fail to see when they are buying life insurance is that it is an investment and should be treated like any other financial product. Before buying the product, think about what function you are looking for it to perform. Think about what benefits would appeal to your specific needs and goals.
Weighing the Risks.
Creating a profile of your risks is a great thing to do before choosing a life insurance policy. Think about what health conditions and accidents you might be susceptible to based on your family history, lifestyle and existing health conditions. For example, if you are a smoker, you will be more susceptible to throat and lung cancer. Or perhaps you have a family history of a disease like emphysema. Identifying these risk factors will prove to be a massive help when choosing the right policy.
Recognise Your Life Goals.
If you have financial dependents, you need to make sure that your policy is right for them too. Namely, you need to make sure that in the event of your death, your family will still be able to enjoy a continuity of lifestyle and pursue their life goals. For example, if you have a child, you need to think about their education and their goal of, perhaps, going to university. Other ambitions to think about might be purchasing assets or a comfortable retirement.
How Long Do You Want It?
Hopefully, the first three considerations on this list should help you to calculate how much coverage you need. But, considering the length of time you want to have the product is equally important. Deciding this will heavily rely on your reasons for purchasing the policy in the first place. For example, if you only need the policy to make sure you can realise certain life goals, you may not require it after you have achieved them – in which case, you might look toward a policy with a shorter term. Similarly, you might purchase a policy based on the number of earning years you have in your future. All of these factors will affect the term of the policy. If the tenure of the product is too short, then your policy might expire too soon which might mean you have to take out a more expensive policy later in life. On the other hand, if the policy is too long, you will end up paying more premiums than you would have to, which can be costly.
Evaluate Your Options.
Once you have decided what type of policy you’re looking for and your specific needs and risks, it’s time to pick the right policy for you. This should be a fairly involved process whereby you look at all the available options in the market and compare them on their ability to meet your needs. One of the best ways to do this is to use an expert insurance broker. A broker can go through your needs and risks, showing you the available options that best suit your circumstances and, often, even showing you options that you didn’t know existed.
If you’re concerned about whether you have enough cover or want to discuss what policy is right for you, contact IAE Insure today at email@example.com or call +971 4 396 1878 for a FREE no obligation quote. Visit us at www.iaeinsure.ae.