How Does a Life Insurance Policy Work in the UAE?

By Pardeep Garg
  | Published: 31 August 2021 | Last Updated On: 14 September 2021

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Life insurance companies in the UAE offer different types of plans, such as term plans, whole life insurance plans, endowment policies, etc. These insurance plans provide you with peace of mind ensuring that your family members will be financially secured even if you are no longer available to provide for them.

Let us go ahead and learn more about what life insurance policies are with their types and benefits, followed by what they cover and how they work in the UAE.

What is a Life Insurance Policy?

Life Insurance is a type of agreement between the insurance provider and the policyholder. The insurance company promises to provide the beneficiary with the sum assured in the case of the policyholder’s demise as per this agreement.

In exchange for the life cover and to keep the life insurance policy active, the policyholder needs to pay the insurance provider regular insurance premiums for a specific term. Some life insurance policies offer some additional benefits at the time of maturity. These benefits include interest, returns on investment, pension, and much more.

Types of Life Insurance Plans in the UAE

The insurance companies in the UAE offer different types of life insurance plans for individuals and their families.

  • Whole Life Insurance: Whole Life Insurance offers coverage for the entire life of the policyholder. With a whole life insurance policy, the insurance company pays the sum assured to the beneficiary in the event of the policyholder’s untimely demise. Additionally, the whole life insurance policy offers the cash benefit for the policyholder that allows them to withdraw or borrow a cash value based on their financial preferences.
  • Term Life Insurance: Term Insurance is one of the basic types of life insurance policy that offers coverage against an unfortunate event of the policyholder’s death. The policyholder can buy a term insurance plan for a specified term of years. With term insurance, the insurance company pays the sum assured to the beneficiary in case the policyholder passes away while the policy is active.
  • Endowment Plans: This type of life insurance policy offers the death benefit along with the policy maturity benefits that the policyholder will get at the end of the policy term. Like other insurance plans, the insurance company provides the sum assured to the beneficiary in the event of the policyholder’s sudden demise in an endowment plan.
  • Money Back Policy: In Money Back Policy, the policyholder gets a part of the sum assured at regular intervals during the policy term. And at the maturity of the life insurance policy, the policyholder gets the remaining sum assured. However, in the event of the policyholder’s untimely demise, the beneficiary gets the full amount of sum assured.
  • Unit Linked Insurance Plan (ULIP): Unit Linked Insurance Policy is a combination of insurance and investment. These policies are called hybrid insurance plans and let the policyholders invest their money in two divided portions. One part of the payment is paid as the insurance premium, and the other part gets invested in the market to grow the policyholder’s wealth.
  • Pension Plan: This type of life insurance policy is also known as a retirement plan. With this policy, the policyholder can plan a financially secured retirement as it offers a regular income in the form of an annuity payment based on the type of policy chosen. The insurance company invests this amount at the policy maturity to generate a regular income stream (pension) for the policyholder.

How Do Life Insurance Policies Work in the UAE?

Here are the steps to better understand how a life insurance policy works in the UAE.

  • Step 1 - The applicant looks for the best life insurance policy and checks the basic requirements for the same. They can visit various insurance providers’ online portals to compare the life insurance plans.
  • Step 2 - Once the policyholders choose a life insurance policy, they provide the essential documents and pay their first premium to the insurance provider to complete the purchase. The life insurance policy premium may vary from insurer to insurer. The applicants can also use online life insurance premium calculators to evaluate the insurance premium.
  • Step 3 - The insurance company completes the paperwork and guarantees to pay a sum assured to the beneficiary in the event of the policyholder’s untimely death while the insurance policy is active. This ensures the financial security and stability of the policyholder’s family members.
  • Step 4 - If the policyholder survives the whole life insurance policy term, they get the sum assured and other relevant benefits at the time of maturity. However, in case the policyholder passes away while the term is active, the beneficiary gets the sum assured. 

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What Does Life Insurance Cover in the UAE?

The life insurance policy cover can be divided into two parts – the cause of death and the expenses.

Causes of Death Covered Under Life Insurance

Here are the causes of death a life insurance policy in the UAE covers.

  • Natural Causes: A life insurance policy covers the death caused due to natural reasons like old age, heart attack or illnesses like cancer, brain tumour, etc.
  • An Accident: A life insurance policy also covers the death caused due to an accident, including the overdose of prescribed medication.

Expenses Covered Under Life Insurance

The policyholder’s beneficiary can spend the sum assured to meet any kind of financial requirements. Here are the expenses covered under a life insurance policy in the UAE.

  • Outstanding Debts: These expenses include mortgage expenses, credit card bills and other private loans repayment.
  • Everyday Expenses: These expenses include buying groceries and paying bills for other household essentials.
  • College Fees: These expenses include the funds required for continuing the education for the spouse or the policyholder’s children.
  • Child Care: These are the expenses made while spending for the child care that was initially provided by the policyholder.
  • End-of-Life Expenses: These include end-of-life medical care or funeral expenses.

Why Buy a Life Insurance Policy in the UAE

Here is a list of benefits of buying life insurance policies in the UAE.

  • Guaranteed Income: Life insurance policies offer a benefit of guaranteed income for the policyholders. In case the policyholder survives the whole insurance policy term, they get the sum assured as the maturity benefit. On the other hand, the sum assured is provided to the beneficiary if the policyholder passes away before the term ends.
  • Death Benefit: All the life insurance policies offer death benefits for the policyholders. If the policyholder dies while the policy term is active, their family members are provided with the death benefit in the form of sum assured.
  • Coverage for Health Expenses: Most life insurance plans in the UAE offer coverage for critical illnesses, total or partial disability, and hospitalization expenses. If the policyholder suffers from any such event, the life insurance policy allows them to seek proper treatment while paying for their medical expenses.
  • Helps in Wealth Creation: Some life insurance plans like money back or unit-linked life insurance policies offer two-way benefits for the policyholders. These benefits include both coverage and investment. These insurance plans ensure future wealth creation for the policyholders as well as insurance coverage benefits.
  • Peace of Mind: As we all know, life insurance policies come with a death benefit that provides the sum assured to the beneficiaries. With this benefit, the policyholders can have peace of mind that their loved ones will be financially secured in case of any unforeseen event.
  • Add-on Riders: The best part about the life insurance policies is that they allow policyholders to add riders based on their medical conditions. Most life insurance policies in the UAE offer add-on riders like terminal illness cover, critical illness cover, personal accidental coverage, temporary/permanent disability cover, waiver of premium benefit, and many more. These riders are added to the insurance policies to enhance the coverage and protection provided.

Eligibility Criteria to Apply for a Life Insurance Policy in the UAE

All UAE residents are eligible to apply for a life insurance policy in the UAE. However, they must meet the eligibility criteria as determined by their chosen insurance provider.

  • The applicants must have a reliable source of income.
  • The applicants between 18 and 75 years are eligible for buying a life insurance policy.
  • The applicants must be UAE residents and should have valid documents for verification purposes.
  • Emiratis and Expats can also buy a life insurance policy in the UAE, provided they have relevant documents.

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Note: The eligibility criteria may vary from insurer to insurer.

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Documents Required for Buying a Life Insurance Policy in the UAE

The applicants must have the following documents when applying for a life insurance policy in the UAE.

  • Emirates ID: Original and a copy
  • Passport with UAE residence Visa: Original and a copy
  • Utility Bills: For address verification
  • Passport-sized photographs
  • Bank Statement (of the past three to six months)
  • Income Certificate/Salary Slips
  • Medical reports: for health status verification

Note: The documents requirement may vary from insurer to insurer. Some insurers may ask for additional documents for verification purposes.

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Conclusion

Life insurance policies indeed offer protection against the financial loss caused due to the sudden demise of the policyholder. However, they have some additional benefits that may make the policyholder’s life easier. These benefits include investment options, medical covers, etc.

You must look for the best life insurance policy based on your financial and medical needs. And if you need expert advice to find such an insurance plan, we are here to help you. You can call us anytime to seek assistance. Our experts will guide you through the best available life insurance options and help you choose the one that fits your financial needs.