What is Life Insurance?
Life is uncertain. You might be working in a plush office, drawing a fat pay check and have a huge mortgage to support your increasing financial needs and lavish lifestyle. But what if an accident tomorrow leaves you incapacitated for life or worse kills you, leaving your family in doldrums. A life insurance policy is, therefore, a must if you care for your family’s needs in the event of your death. A life cover will provide a lump sum to your family in the case of your death. In addition to the life cover, a life insurance policy may offer several other attractive features such as waiver of premium on disability, critical illness coverage and so forth. In order to choose the most suitable life insurance policy, you should do market research before zeroing in on several features such as the contribution period, currency, and permanent total disability and accident death benefits among many others.
Types of Life Insurance
There are different kinds of life insurance policies in the UAE market. Though the final aim of all the life insurance policies is to provide the family of the policyholder if something should happen to them, each kind of insurance policy has its own unique set of features and benefits. Given below are some of the common types of life insurance policies provided by banks and financial institutions in UAE.
- Term Life Insurance Policy - Term Life Insurance policies offer insurance cover only for a defined term, it may be one year or more depending on the policy. Death benefit will be paid to the family of the policyholder in case of death of the policyholder during the policy term. Protection will be offered as long as the premiums are paid. Though the policy terminates after a certain period of time, some term insurance policies offer the option of renewal. The premiums more often than not increase with age for each renewal.
- Whole life Insurance Policy - Whole Life Insurance Policy also known as straight life insurance policy is probably the only life insurance policy that offers cover up to the age of 95 years. The customer or investor can avail the benefits of protection from the policy for whole life by paying premiums only for a certain period of time. The Whole Life Insurance policy usually comes with level premium. It is an investment linked insurance policy.
- Universal Life Insurance Policy -A Universal Life Insurance Policy is a life insurance policy that will let the policyholder customise their policy by adding a wide range of investment options. The policy comes with a wide range of benefits including death benefit, tax benefits and much more.
- Personal Accident Insurance Policy - Personal Accident Insurance is an optional insurance feature that can be added to your general life insurance policy. This insurance policy will assist the family of the policyholder with expenses such as funeral expense and other expenses after the death of the policyholder. There are certain limits on this policy.
Importance of Life Insurance
A life insurance policy is a protection instrument for your family in case of your unfortunate death courtesy the life cover benefit it guarantees. You can select a contribution period that is most suitable to you- single premium, 5 years, 10 years, 20 years or whole lifetime. A policyholder, therefore, remains covered for as long as he or she is alive by availing the life cover benefit which, depending on the insurance provider chosen, increases every 5 years in some cases.
Consider this: Sheik Mohammed, a resident of Dubai, met with an accident 20 years ago, following which, he opted for a life insurance policy provided by MetLife. He pays a monthly premium of over $400. In the event of his death, his wife will get a lump sum that will not only help her pay off their mortgage but also fund her child’s education. His basic life cover of $100,000 (chosen 19 years ago) has now increased to $130,000. What’s more, the plan also provides a comprehensive accidental insurance in addition a build-up a cash value.
Key Features and Benefits of Life Insurance Policies
- Offers life cover protection. With life coverage benefit, your family can meet any financial necessities or obligations in the event of your death.
- Offers low premium costs. Life insurance policies, by and large, are affordable in that they provide high coverage at lower costs compared to other insurance products.
- Multi-currency: Customers can choose between three major currencies - USD, GBP or EURO in Dubai. In the event of the death of the policyholder, his or her family will get the lump sum in the currency selected.
- Value addition: Life insurance is an affordable financial policy which ensures that your family can pay off all your liabilities in the event of your death.
- Flexibility in terms of customization: Life insurance policies can be customized to suit your requirements by adding various benefits, namely, forever benefit, waiver of premium, accidental death benefit, permanent total disability and personal accident among others.
- Offers Renewable Terms: Most life insurance policies offer renewable terms. For instance, if you choose a five year renewable term policy, you can not only enjoy coverage for the said period but also renew the policy for the same duration. The term can be converted to a permanent plan, i.e., whole life or endowment plans. Also, a level term insurance offers customers the flexibility to pay premiums over a period of 10, 15, 20 and 25 years with a fixed premium throughout the policy term.
- Some life insurance policies have a provision of a replacement income if the sole breadwinner dies.
- In many cases, life insurance cover helps consumers repay any loans or debts left behind by the policyholder.
- Suicide (whether sane or insane at the time) within 12 months of the policy commencement date.
- If a benefit is payable as a direct or indirect consequence of any act of the Life Insured which is a violation of any law
- Active war risk
How to make a claim?
A claim form by the insurance provider should be duly filled out and signed by major beneficiaries separately. Full details of the deceased, coverage and the currency opted for should be specified in the form. The cause of the loss of life apart from the date and place of the loss of life should be listed out. Details of the occupation at the time of loss of life besides the full name and addresses of physicians who examined the insured during his/her last illness should be specified. Information regarding the claimant or beneficiaries should also be provided. They are three major capacities through which customers can make a claim, namely, designated beneficiary, legal guardian (Guardianship Certificate) and successor/ legal heir (legal succession certificate).
Buy Life Insurance Online
Several banks such as MetLife provide online access to view, manage and pay premiums of policies 365 days a year. For a comparative analysis of insurance policies offered by various insurance providers, you can get quotes from the companies’ websites. Most insurance providers have their own websites which make making payments of premium and other transactions easier and hassle-free for the benefit of customers. Customers should choose an established insurance provider and check the clients’ testimonials online before opting for a policy. Alternatively, customers can also log in to any of the free insurance sites or aggregator websites to access information on life insurance policies online.
How to Choose the Best Life Insurance Policy
First, you should take into account the standing of the insurer. There are several options available such as life insurance combined with savings as opposed to pure life insurance policies. Examine your requirements carefully before opting for a plan. If you choose a life insurance policy which is also a savings plan, you have to keep in mind that in many cases, savings are lost when a life claim is made. You should also look out for a critical illness cover since a critical illness may stop you from working. Several other parameters should also be considered such as increasing cash value, changes in the coverage amount and so forth. Also, one has to examine accident death and permanent disability benefits in addition to waiver of premium on disability among many others.
Top Insurance Companies/Banks/Policies in the UAE
The United Arab Emirates (UAE) is the largest insurance market in the GCC. However, the non-life segment accounts for the bulk of the premium. Nevertheless, in the recent past, growth of the life insurance segment has been significantly higher compared to the non-life segment.
The insurance sector in the UAE is, by and large, dominated by publicly listed companies with majority government-holdings. Major participants in the life insurance segment in the UAE include companies which have to be registered as public joint stock companies and listed on the Dubai Financial Market. Other participants include government-owned unlisted entities apart from private and foreign firms. There are over 60 insurance companies currently operating in the UAE.
Distribution in the insurance segment in the UAE is largely managed by brokers and agents. Bancassurance, although gaining increasing popularity, is still underdeveloped in the UAE owing to legal uncertainties. Bancassurance has, however, recently witnessed robust growth in Dubai with several banks entering into contracts with top insurance companies to provide a wide range of products.
- HSBC - Whole of Life-Futura
- MetLife- Life Care policy
- Abu Dhabi Commercial Bank (ADCB) - Whole life Insurance
- National Bank of Abu Dhabi (NBAD) Life Insurance
- Emirates Islamic Bank- Takaful Emarat Secure Life Plan
Futura by Zurich International Life Ltd, is a lifetime insurance plan which offers flexible benefits such as critical illness, permanent and total disability apart from a guaranteed life cover. Customers can pay premiums on a yearly, half-yearly, quarterly or monthly basis.
Life Care is a life insurance plan that gives guaranteed annual cash back and bonuses. It provides a 10% increase in coverage every five years, 2% cash back every year after 10 years and annual pay-outs for permanent total disability.
Whole of Life insurance is an insurance cover that protects an individual up to 95 years. A customer has to pay the premium for a defined term and enjoy lifetime protection. This is an investment linked (Unit Linked or Interest Sensitive) policy. It also offers the cash value benefit.
It is a comprehensive- ADNIC (Abu Dhabi National Insurance Company) backed life insurance plan. NBAD’s Secure Life Plan 1 covers accidental death and partial or total disability due to accidents while Secure Life Plan 2 covers natural or accidental death in addition to partial or total disability due to accidents.
It offers a comprehensive life insurance plan with competitive premium rates and wide range of coverage options. Takaful Emarat Secure Life Plan is provided by Takaful Emarat while Emirates Islamic is a distributor. Requires a minimum monthly premium of AED 500 or USD 150.
Frequently Asked Questions - FAQs
What are the factors to be examined while deciding the life cover?
On what does the cost of insurance policy depend?
What’s the difference between term life and whole life insurance plans?
Can I borrow against life insurance policies?
How much life insurance do I need?
Your income, monthly living expenses (mortgage, food, and clothing), allowances for education and debts need to be factored in before finalizing the life cover. Also, costs related to death such as medical bills (uninsured) and funeral costs should also be considered.
It depends on several factors such as how much cover you need, duration of cover, your age, occupation, travel, medical condition and lifestyle in addition to the benefits you select such as critical illness and waiver of premium among others.
Term life insurance covers only a specific time period while whole life insurance provides cover for the rest of your life, provided the premiums are paid on time. In case of whole life insurance, when the policyholder dies, the beneficiaries receive the death benefits. However, under a term life insurance plan, the family receives the death benefits only if the death occurs during the policy period.
Borrowing against one's insurance policy is, by and large, less expensive than taking out a new bank loan, since interest rates in the former are usually much lower than the rates charged by most banks. Under a whole life insurance policy, you can use the cash value of the policy as collateral for a loan.
You should ideally contact a financial advisor to help you determine the coverage you and your family needs based on your income and financial obligations. You might want to make use of several online calculators to make an accurate assessment of your requirements. Many believe a life insurance policy should ideally pay a benefit about seven to ten times your yearly income. However, go for a policy which caters to your requirements.
News about Life Insurance in the UAE
Life insurance sector oversupply may lead to industry rationalisation
The demand for medical insurance is increasing due to the introduction of compulsory insurances. The oversupply of life insurance sector will impact the profitability and business. Due to the market hyper competitiveness, the rates have lowered and some of the providers are facing losses. The lower crude oil prices will affect the non-life premium growth as well. There has been an increase in the premium rates for motor insurance to underwrite the losses in the insurance sector.
23rd January 2017
Around 58 percent of the UAE residents don’t have a life insurance
A new survey has revealed that a huge number of residents of the UAE do not have a life or critical illness insurance. Out of the 503 respondents, 58% did not have a life insurance. Around 21% said that they had a critical illness insurance. 37% of females had insurance cover while 45% of men had insurance cover. The main reason why an individual didn’t have an insurance was because it was expensive. The number of people not having an insurance has increased from the previous year.
15th September 2016
New Life Insurance Company is being thought off says UAE Insurance Authority
There has been a discussion of a nationwide life insurance company to be established, this company will have assets of Dh1.5 billion. The objective is to enhance better relations with national companies in this competitive local market which is extremely competitive. The current life insurance policies volume is more than Dh8 billion, with 19% represented by national companies, and foreign companies represent 81%. There are 27 Takaful, or Islamic insurance companies that are licensed life insurance companies in the UAE, these comprise of 17 national and 10 foreign companies.
01st March 2016
French Insurer AXA, to enter the UAE Life Insurance market
AXA, the French insurer will have a subsidiary launch operations later in year in the UAE. They will offer life insurance and saving policies in the UAE, through their new entity called the AXA Green Crescent. Since insurance was not an open product to sell earlier, AXA would like to finalize a market study by the mid of this year. The study will provide them with a strategy, and allow them to set up a proper team, before operations begin in later part of the year. AXA Green Crescent will operate solely within the UAE, and find the region has a lot of potential.
15th February 2016
UAE’s Life Insurance Sector Expected to Grow 10.8% annually by 2019
A report by Timetric’s Insurance Intelligence Centre said the UAE’s life insurance segment is expected to grow at an annual rate of 10.8 percent by 2019. The main reasons for the sector’s strong performance are a rising number of expatriates and an improving economy.
In the last 5 years, the life insurance segment’s gross written premium increased from AED3.8 billion ($1 billion) to AED7.5 billion ($2 billion), at a review-period Compound Annual Growth Rate of 18.7 per cent. The sector’s insurance penetration rate in the Gulf Cooperation Council (GCC) region stood at 0.62 per cent in 2014. This number is very low compared to developed Asian economies such as Taiwan and South Korea, where the penetration was at 15.3 percent and 9.2 percent respectively in 2014.
The demand for life insurance products went up during the review period as the UAE’s life expectancy increased from 76.3 years in 2010 to 7.1 years in 2014. The UN puts UAE’s total population at 9.44 million in 2014 – comprising 13 percent UAE nationals and 87 percent expatriates. This offers insurers an opportunity for expansion.
8th February 2016
Obesity Might Raise Premium Price for Insurance
Analysts have said that when a bank evaluates a potential customer for insurance, the fact that they are obese may increase the premiums they have to pay by as much as 25% to 40%. The increase in the premium is apparently most prevalent in premiums paid towards life insurance products. The reason this is making insurance more costly in the UAE is because a sizable part of the population of the UAE is actually obese.
The study conducted by Zurich International Life revealed that out of 20,000 people who had applied for life insurance, about 13% were obese and about 47% would be considered overweight. Even though insurance companies have declared no official numbers, it is estimated that the premiums for obese/overweight people can be higher by 10% to 40%.
22nd September 2015