• Guide and Advice for Expats for choosing Life Insurance in UAE

    Life insurance is a contract between the policyholder and the insurance company. For the premium paid, the insurer will pay death benefits to your beneficiary after your death. The death benefit is a lump sum amount that will cover funeral expenses and take care of other bills. You can choose if you want to receive a lump sum payment or part of it while you are alive. This again depends on the type of insurance you have chosen and the insurance payments are made out for treating critical illnesses. Having a life insurance gives the policyholder peace of mind.

    The insurance rates depend on the applicant. The earlier the policyholder takes the policy, cheaper the premiums. Insurers also consider your income, age, gender and lifestyle while setting the premiums. Women have cheaper premiums as they live longer than men. You need to shop around and choose a plan that is cheap and one which offers the best benefits.

    Steps to choose a life insurance policy in UAE

    You can follow the following steps to choose the right life insurance policy in UAE:

    1. Finding the right life insurance policy:

      If you are wondering why you need a life insurance policy, you must understand that your family is financially dependent on you and that they will be penniless if you were to die. Life insurance can also be used as an investment tool to save for your retirement, children’s education or marriage. You can also save tax as well. Different policies have different features and terms and conditions. You need to read through the features and choose a policy that will satisfy your needs. You need to:

      • Evaluate the need for insurance. List your requirements and choose a policy based on it. It can be to save tax, save money, etc.
      • Understand your liabilities and assets. This will help you assess how much insurance you will need. Consider your family’s lifestyle expenses and what they will inherit in your absence, expenses they might incur in the future like marriage or education.
    2. Compare life insurance policies:
      • Comparing the different policies is important. Consider the following questions when comparing your life insurance policy:
      • How much does your benefit and premium vary each year?
      • Cash value you can accumulate in the policy.
      • Parts of benefits of premiums that are not guaranteed.
      • Policy fees built into your premiums.
      • If the term policy can be converted to whole life policy regardless of your health.
      • If the policies have dividends.
      • Level of benefits, if they decrease or increase.
      • If you are choosing a new policy, check if the new quotes match your needs better than your old policy.
    3. Choose the right company:

       It is advisable to choose a life insurance policy from a UAE based insurer if you are an Emirati. If you are expat, take a life insurance policy in your home country, this will make it easier for your family to make claims and they won’t have to fight a legal battle after your death. Take a policy that will cover for the time you are in UAE.

    4. Find the affordable life insurance policy:

      The first thing you must ascertain is that the premium is affordable. Initial premiums are usually higher but they decrease as the policy grows. You must also consider if you can pay the premium if you were to lose your job. Disclose all family history and use of tobacco use at the time of taking the policy. If there is a family history of illness or if you use tobacco, the premiums will skyrocket. Take a life insurance policy when you are younger, the premiums will be lower. Choose a policy that is based on your income and needs.

    5. Protection and flexibility:

      Term insurance takes care of the financial support your survivors will require if you die unexpectedly. If you wish to build cash value and for a long term, choose whole life insurance or universal life insurance or variable universal life insurance.

      Some universal life insurance or variable universal life insurance policies let you make flexible payments after you have paid enough to cover your policy charges.

    6. Choose one type of life insurance policy:

      There are various types of life insurance policies offered by insurers, they are:

      • Whole life insurance:

        This is the most expensive type of insurance as the premiums are higher and you can also save by accumulating money throughout the life of insurance policy term. A specific amount is paid at the time of death of the policyholder. A lump sum will be paid if you survive a certain date as mentioned in your contract. This policy covers your spouse and children. This policy takes care of your long term insurance needs.

      • Decreasing term life insurance policy:

        The premiums under this policy will keep decreasing as the years go by. This type of life insurance policy can be used to erase mortgage debt if the owner dies. This type of insurance is expected to be taken for by the mortgage companies before they lend you the money.

      • Yearly renewable policy:

        The premiums keep increasing each year if you wish to continue it. The premium is decided based on your age. It can also be used to pay outstanding debt in the event you die. This policy is active for 5-10 years from the term you enter into contract with the insurer. This type of policy is not expensive as you are not paying for the element of saving.

      • Endowment plan:

        The sum assured is paid to the family if you die during the term of the policy or if you survive the entire term of the policy. The cost is high as the saving element is attached. The policy also gives bonuses and profits along with the sum assured.

      • ULIP:

        ULIP is a combination of life insurance and mutual funds. The returns vary depending on the funds chosen. The nominee will receive the sum assured or the fund value, whichever is higher. This is the most expensive type of life insurance as the premium is used to invest in fund and cover life. This insurance can be missed by those who don’t wish to take high risk. But, if you can take the risk and want to create wealth while staying covered, this is ideal.

        Do a comparative study of similar policies offered by different companies and ensure that you can afford the premium. Check if the insurer can give you added benefits. Read the fine print before you choose a life insurance policy.

    7. Coverage:

      Choose the life insurance policy for the time you wish to be covered for. If you want to be insured till you are able to pay off your mortgage, choose a term insurance for that period. The other types of insurance cover you for life as long as the premiums are being paid.

    8. Fees and charges:

      Before you take any policy ask what all fees and charges are applicable with your policy. You must also understand how they will be calculated and for what purpose are they charged for. Then compare the fees and charges applicable on policies offered by different insurers.

    9. Access to money:

      If you need to take money out of your policy for certain milestones in your life for example for education, marriage, etc. choose universal or variable universal products. These types allow you to withdraw money from your policy or you can take a loan on a lower rate on the policy. It is best you understand the implications of this in advance and understand the rate on the loan and how much money you can take.

    10. Important factors for choosing a life insurance policy:

      You need to review your needs and who depend on you and then check if the policy will provide for your parents, spouse and children after your death. If you have a retirement plan then you need not invest more in a life insurance policy. The next question you need to ask yourself is that if you need cover only for a certain term or for the whole life. Then consider attaching riders to your policy. Even if you don’t want to attach a rider it is for the best that you have an option to attach one just in case. The cover increases and which will eventually benefit your loved ones. Don’t ever pick a policy that you cannot afford. You aren’t trying to increase you tax benefit, you are trying to cover for expenses in your absence.

    Keep your insurance and savings separate as much as you can. This will help you concentrate on each factor separately. You can invest elsewhere and earn a better return. Shop around a lot and compare before taking a life insurance policy. Don’t always trust the brokers, they are just aiming to earn the commission cheque and may sell you a policy that will not help you meet your insurance goals. 

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