Buying Life Insurance in Abu Dhabi - A Comprehensive Guide!

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It is anything but natural that you would never want to think about the negative possibilities in life. In fact, for most of you, illness, death, or any serious injury might seem to be unthinkable at the current stage of your lifetime (until you have legit entered the old age). However, the sad fact of life is that these things can happen to anyone at any time.

If you are the sole bread-winner of your family, then you need to secure them in case the worse take place. There are a majority of people, especially the young ones, who do not even like thinking about all of this and definitely do not want to invest their hard-earned money on life insurance plans when they can use it for splashing out on other things that sound more exciting to them.

Although insurance may be very valuable, you need to be more careful while buying it. Here is a list of dos and don’ts while purchasing a life insurance policy in the Emirate of Abu Dhabi. 


#1 Going Through All Your Options

You have three main kinds of life insurance plans, out of which you can select the one that suits your needs.

  1. Whole Life Policy: This insurance policy offers the payment of a lump sum amount at the time of the death of the policyholder. This type of life insurance is expensive and the premiums are normally paid up to the 95 years’ maximum.
  2. Level Term: This type of insurance offers the payment of a lump sum amount only at the time of the death of the policyholder during the payment term. It is less expensive as compared to the whole life policy and the premium payment is made for a fixed term.
  3. Decreasing Term: This type of insurance offers the payment of a lump sum amount only at the time of the death of the policyholder during the payment term. The lump-sum amount will decrease as the policy matures and the premium payment is made for a fixed term. It is generally the most affordable amongst all three of these types. 

The policy seekers have the flexibility to use one of these three major types of life insurance for building a detailed and custom plan for themselves that suits their needs. 

#2 Single v/s Joint Policy- Choose the One!

In case you have a partner, you will have to choose the kind of policy you want.

Generally, joint life policies are more affordable. However, they pay out only once. Therefore, if one of the partners dies, the other one will receive a payout but there will no coverage for the future (which will be pretty expensive in case the surviving partner is in the old age).

Single life insurance plans are an alternative to the joint-life plans. Having a single policy costs more; however, offers customized coverage, which is obviously more flexible. You can consult an expert for getting a piece of knowledge about how the two kinds of policies work and then finally deciding on the type you want. 

#3 Protect Your Insurance

If you have done your research on insurance already, you must have come across a term called “waiver of premium”. For those who do not know, it’s a clause that can be added to the life insurance plans (or other types of insurance for that matter) that cover the future inability of making your premium payments in the case of illness, sickness, or accident. 

#4 Check the Amount You Are Owed

There is a possibility of you being eligible for the benefits of death in service from your employer. Such contribution would usually amount to 4 times your income. If you are eligible for this benefit, you can decrease the requirement for projected coverage (that is, the coverage amount you need on your insurance) by this value. This will help you in saving money because you will have less amount of coverage to pay for. 

#5 Linking the Mortgage and Life Insurance

The policyholder may consider life coverage, especially so that your dependents can continue to afford the payments on the mortgage in the case of the demise of the policyholder. In such a situation, select your life insurance plan that suits the kind of mortgage you have.

A level term life coverage policy involves a lump sum payment, which does not decline over time. Hence, the plan is sensible for only those having an interest-only mortgage, where the interest payments have not decreased the lump sum mortgage amount owed. 


#1 Smoking (A Big No-No)

Of course, cigarettes are very harmful, but any other kind of smoking including the cigars, e-cigarettes, vapes, etc. can result in a drastic rise in your insurance premium amount. Try and put a curb to your smoking habit for around a year. You can then present yourself in front of the potential insurance providers in the form of a non-smoker.

#2 Not Reviewing Your Life Insurance on an Annual Basis

Although reviewing your insurance plan annually, is very important, we tend to overlook it. In order to keep on top of your personal finance, it is important to review your financial products annually. The same is the case when it comes to life insurance, especially because you need to keep your insurance provider updated accurately about the changes in your living situations for ensuring that your plan remains valid. 

#3 Forgetting the Taxman

There are various life insurance plans that allow you to write your insurance policy ‘in trust’, meaning that at the time of the death of the policyholders, the policy is not counted as a part of their Estate. Hence, they can avoid IHT (Inheritance Tax).

You can discuss this with an expert as usually there are potentially delicate complications when it comes to the person you are required to get legally involved. 

#4 Skimping While Assessing the Amount of Coverage Required

The term coverage describes the payout that you need out of your life insurance plan for paying everything required by your family. The amount of coverage needed is generally underestimated by the consumers. However, coverage is one of the most important aspects of your insurance, hence, it should be estimated appropriately.

While assessing the coverage, consulting a financial expert can be considered to be a good idea. The amount of coverage in your life insurance policy must be ten times the highest income of the earner. 

#5 Forgetting about the Critical Illness Cover

This cover on your life insurance plan will deliver a lump sum amount in the case of a certifiable diagnosis of the diseases that are covered in the plan, including multiple sclerosis, cancers, heart attack, and many various others.

There are chances of getting a better deal in case you simply add-up the critical illness cover to your existing plan instead of going for an independent plan.

Make sure you compare this cover on your plan with other IP or income protection insurances. If you want coverage for possible conditions in the future where you become incapable to work due to sickness, accidents, or injuries, you have other available insurance options- both long and short term.

It is important for you to go through the fine print of the critical illness plans. With such a wide range of possible diseases, ensure that you are aware of the ones you are putting your precious money in. You must also be aware of the extent to which the policy will help you. 

Now that you know the dos and don’ts, here are the answers to a few common questions that you may have.

Do I Need any Insurance Cover?

The first thought that comes up in every mind while purchasing life insurance is whether you really need it or not? The solution to this is simple- ask yourself one important question that how would your family manage if something unfortunate happens to you?

If they rely on your income and you have debts too, then you definitely need a cover. However, not everyone has a dire need for insurance. You might not require coverage if you have no such family member or loved one who is dependent on your income. Or when the assets on your name are sufficient to cover you and your spouse in the case of a mishap.

Nevertheless, if you do require insurance, your next step must be deciding what you exactly need. 

How Can I Secure My Life?

The most common and the purest kind of life coverage is called term insurance that offers a payment of lump-sum cash if the policyholder passes away within the pre-determined term of the policy. Such a policy will be available at a low cost; however, it does not involve any cash-in value and no payout in case the policyholder survives the term.

The alternative, in this case, is a whole life insurance policy where the premium is invested and the policy will pay out whenever the policyholder passes away.

Both these products are offered by insurance providers and are available to the UAE residents through financial advisors. However, whole life plans have been criticized for being poor-performing as well as expensive investment instruments.

Another drawback of whole life plans is that since they are expensive, it becomes a little difficult to keep up with the premiums in case the decided term of the policy goes beyond the retirement of the policyholder.

You must consider the drawbacks as well as advantages of both term and whole life insurance plans carefully and settle for the one that suits your requirements and at the same time your budget. 

What Should Be My Coverage Amount?

When it comes to a critical illness, the average recovery duration is usually two years. Hence, an income of two years is important. Therefore, if you are earning a salary of say AED 1,50,00 annually, you will need a cover of AED 300,000.

You can exclude the amount of you have saved as your emergency funds. For instance, if you have AED 100,000 in the bank as emergency funds, you will only need coverage for AED 200,000.

But, you will need a little more coverage depending upon all your financial commitments. These may also include mortgage, funeral expenses, and various ongoing expenses such as living expenses of your spouse, your children’s education, and much more. 

The Bottom Line!

It is suggested that you do not buy your life insurance policy in a haste. Life insurance plans can be meshed up with all kinds of financial tools to your benefit. You can consult a broker or a financial expert for a piece of suitable advice.

It is important that you research well before choosing a plan, tenure, and the coverage amount. This is because it will help you in building for yourself a detailed and powerful life cover package that will come to your rescue at the time of unforeseen and unfortunate events in your life.

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