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How does Return-of-Premium Life Insurance Work in the UAE?

By Pardeep Garg
  | Published: 19 July 2021

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What is the Premium of Life Insurance?

Life Insurance provides your family a financial cover in case of a bread winner’s untimely death. When you purchase life insurance in the UAE, you agree to pay the life insurance company a pre-specified amount in the form of premiums. The insurance company thus agrees to provide life cover in exchange for this premium. This premium amount varies according to the life cover you purchase.

What is Return of Premium of Life Insurance?

There are usually five types of life insurance in the UAE. Among these, some of the plans do not return the life insurance premium you pay over years to cover your life However, some life insurances return the premium paid on the life insurance. These include Endowment Life Insurance Plan, ULIP, and Money-back plan. However, the premium on such life insurance in the UAE is higher than life insurance that does not return the premium.

Work Process of Return of Premium of Life Insurance in the UAE?

The return of premium of life insurance works according to the nature of the life insurance policy in the UAE. Generally, the mechanism follows the same pattern where you, as the policyholder, pay the premium to the company. You will be required to pay this premium up to the term of the insurance. Let us say that you purchased life insurance of AED 400,000 for 20 years at the premium of AED 530. Then, you will be required to pay AED 530 annually to continue the life insurance for 20 years. After 20 years are completed, your life insurance provider will pay out the amount with some interest. In case you miss a payment for more than six months and your policy lapses, the benefits received on the life insurance will not be applied which means in case of your demise, your family will not receive any money. On the other hand, if you pass away during the tenure, the entire amount of life cover is paid to your family.

However, each life insurance plan works differently:  

Endowment Life Insurance Plan

ULIP

Money-back plan

Lower Interest rate

Higher Interest Rates

Medium to low interest rates

No Market investment

Market Investment

No Market Investment

Returns the entire amount at the termination of the life insurance plan

Returns the entire amount at the termination of the life insurance plan with bonus and high interests

Returns money in regular intervals

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To ensure that your life insurance continues to offer you life cover, you must pay your premium regularly.

Benefits of Return of Premium of life insurance in the UAE

Usually, when you purchase life insurance, you pay the bank to safeguard your family’s financial condition. This works well in case of your untimely demise. However, in case you outlive the tenure of your policy, the amount remains with your insurance provider which they might use to reimburse another party in case of need. Many policyholders hesitate while investing in regular life insurance because their investment to cover their life is futile after their tenure. The life insurance premium paid to the company remains with them. Under such circumstances, several investors turn towards life insurance in the UAE that returns the premium. Here are some of the benefits of this type of life insurance:

  • This kind of life insurance not only returns the principal amount but also pays some kind of interest on the investment.
  • It allows you to make an annual saving in the form of life insurance.
  • The premium returned is usually non-taxable.
  • The premium is cheaper than the whole life insurance.

Drawbacks of return of premium of life insurance in the UAE

Although this kind of life insurance repays your premium, there are some drawbacks with life insurances that return premium:

  • The premium returning life insurance is higher.
  • The profit earned on these types of life insurance is lower, it would be better that you pay a lower premium for insurance and invest the rest of the amount somewhere else.
  • The benefits offered in life cover under such life insurance may offer fewer benefits.

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Best Insurance Providers in the UAE

According to the UAE insurance authority, 62 insurance companies are operating in the UAE. These consist of 35 National insurance companies and 27 international insurance companies. However, some of the best insurance providers in the UAE that offer a return of premium of life insurance are:

To check, compare, and choose the best premium-returning life insurance quotes visit policybazaar. ae.

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