Frequently Asked Questions about Term Insurance Answered

  | Published: 24 March 2020 | Last Updated On: 08 February 2021

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Conventional term insurance plans are one of the most popular insurance products in the UAE. There are several factors that have contributed to the popularity of these plans. Very often, term insurance plans are misunderstood by a lot of insurance seekers. For instance, several people think that term insurance plans have an investment component associated with them which is not true. Term insurance plans are pure risk protection policies that are meant to secure the future of loved ones and family. In case of these basic risk protection plans, the insured has to pay a premium and if he/she passes away within the policy period the insurer will pay a death benefit to the nominee of the plan. However, there is no maturity benefit associated with these plans and hence there is no payout in case the insured survives the tenure of the policy. 

Every so often insurance seekers are confused about various nuances of term insurance plans and end up not purchasing any policy at all. This is one of the biggest mistakes to make since the insurance seeker’s family would have no financial security at all. In order to secure your family and clearing all your doubts, we’ve come up with some of the most commonly asked questions about term insurance in the UAE, followed by their answers. So stay tuned and read the entire article. 

What are the term Insurance plans? Why do we need term plans?

Similar to other forms of insurance a term insurance plan is a contract between the insurance company and the insured. Based on the contract the insurer collects payment in the form of premium and in return provides financial security by offering a sum assured in case of any event leading to the demise of the policyholder. However, the payout is provided only if the policyholder passes within the validity of the plan. 

A term insurance plan is an absolute must for people of all ages however; individuals who are sole breadwinners of their family with dependents should get themselves insured to secure the future of their families. People with outstanding liabilities should consider buying term insurance plans as it will pay for their debts in case of any unfortunate event. In fact, some term insurance plans offer the facility of monthly payout so that dependents can efficiently manage their monthly expenses. 

How to assess coverage requirement while purchasing term insurance plans in the UAE?

According to a basic thumb rule of the insurance industry ideally one should have coverage 10 times their current annual income. In practice, your coverage needs to be large enough to cover your current and future liabilities along with your long/short financial goals. For instance, if you have a loan of AED 50000 you should get coverage sufficient to repay the outstanding debt. Another important factor to be considered while choosing the sum assured for term insurance plans in the UAE is inflation. The best part of purchasing term insurance plans is that these plans offer high coverage at affordable premium rates. 

What are add-on Riders?

Riders are defined as additional benefits that can be included in the basic term insurance plan in order to enhance the protection quotient of the policies. Riders usually cost about 5 to 10 % of the base price of the policy. There are numerous types of term insurance riders that offered enhanced coverage, some of them are personal accident rider, waiver of premium rider, critical illness rider, etc. 

How to choose the term of insurance?

The term of the policy is defined as the time upto which the plan is valid. Choosing the policy period of term insurance plans in the UAE highly depends upon the age at which you are purchasing the policy. The earlier you choose to be insured, the longer you can remain insured. The ideal approach here is to get a policy that covers you for the maximum period. Term insurance plans are flexible and allow users to alter the plan based on the requirement of the policyholder. 

What types of death are covered in case of term insurance plans in the UAE?

Majorly all types of death are covered in case of term insurance plans which include natural death, death due to accidents, ailments, etc. The criteria vary from provider to provider and some insurers do not cover deaths due to natural calamities and war. To clear all doubts it is very important to read the fine print of the policy which clearly mentions each and every clause and condition. 

What if the Insured survives the entire policy period?

Term insurance plans are pure risk protection plans and have no maturity benefit associated with them. At the end of the policy period if the insured survives the policy will terminate without yielding any maturity benefit. However, the insured party has the provision of renewing the policy so as to maintain a financial backing for their family.