The life insurance sector in the UAE has an extraordinary growth rate (10% a year) and many competing insurers which means great deals for consumers in the UAE. But understanding life insurance in the UAE can be hard. So, how do you get the right deal for you? We’ve made guides before, but in this article we explain some of our expert tips for getting the right life insurance policy.
Understanding Life Insurance in the UAE: What Type of Policy?
Simply put, there are three main types of policy that you can get: level term insurance, whole of life term insurance and decreasing term insurance.
- Level term insurance pays out a lump sum if the policy holder dies during the term of the policy. These policies are generally cheaper than many other types of policy.
- Whole of life term insurance pays a lump sum when you die but this type of insurance is usually expensive.
- Decreasing term life insurance pays a lump sum if you die during the term of the policy. However, the lump sum amount decreases the longer you have the policy. This type of policy is usually the cheapest that you can get.
An important consideration to make when you are deciding which type of policy is right for you is your mortgage payments. In many cases, life insurance policies are intended to cover the cost of a mortgage and other expenses in the event of your death where your dependents will be left without financial support. With this in mind, a decreasing term policy might be a better choice since, if you have a standard mortgage, the outstanding balance should decrease over time – just like your insurance pay-out.
On the other hand, if you have an interest-only mortgage, then a level term insurance policy might be a better option as your dependents will likely require the lump sum to pay for the mortgage in the event of your death.
Work Out Your Coverage.
Many people under-estimate the size of the policy they need to take out. Make sure you consider all possibilities and the reality of your circumstances. As a general rule, your coverage amount should be ten times your income, but you should always consider consulting the advice of an expert insurance broker when looking for a policy.
When working out how much coverage you need, don’t forget to check whether you are eligible for a ‘death in service’ payment from your employer. Usually, these are around four times your annual salary in the UAE. So, if you are eligible, you may well require a smaller insurance policy than you might have thought.
And don’t forget to review your policy regularly – at IAE, we recommend once a year. You not only need to check if your policy is still suitable for your circumstances – for example, have you had a child? You also need to make sure that you are still suitable for your policy, namely making sure that you have told your insurer about any relevant changes to your circumstances. Otherwise, you might find that your policy has been invalidated.
Understanding Life Insurance in the UAE: Get Critical Illness Cover.
At IAE, we’re constantly trying to remind people that they need critical illness cover! Just because you have a life insurance policy doesn’t mean you can forget about critical illness cover. Instead, it’s important to have both. Usually, the best deal will come from a policy wherein you have both, rather than taking out critical illness cover as a separate policy. And, with critical illness cover, you need to be careful – make sure that any illnesses you are more likely to be afflicted with are covered in the terms of your policy.
Other Things to Consider.
There are a number of things to consider other than the important considerations we’ve noted above. One important consideration is tax. When taking out a policy, make sure that you have the ability to write your policy in trust. This means that your policy will not be considered as part of your estate when you die. And this means that your life insurance pay-out will not be subject to inheritance. When looking to do this, it’s important to seek expert advice as this can be a complicated process.
Another consideration is whether you incorporate a ‘waiver of premiums’ clause into your life insurance policy. This clause covers the future possibility that you are unable to pay your insurance premiums because of accident or illness. This is an important aspect that people don’t consider often enough.
Lastly, if you are married and looking to take out a life insurance policy, you must decide whether you take out a single or joint policy. There are pros and cons to both routes so you must sit down with your partner and decide what the best option is. Joint policies are cheaper, but you will only receive one pay-out. So, if your partner dies, you will have to seek cover of your own for the future and this can be expensive depending on your age and circumstances.
If you are still unsure and want to make sure you’re getting the perfect deal for your circumstances, talking to a broker like IAE Insure is the best thing you can do.
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 firstname.lastname@example.org or call +971 4 396 1878 for a FREE no obligation quote. Visit us at www.iaeinsure.ae.