How to Decide the Type of Life Insurance Plan in UAE You Need?

By Pardeep Garg
  | Published: 05 August 2021

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Life insurance is a type of insurance that guarantees to secure you and your family's financial interests in case of their untimely demise. A life insurance plan is an extremely important component of any financial planning. When you are planning your investment, you must consider a life insurance plan to ensure that in case of your untimely demise, your family has a financial backup to meet their monetary needs. However, the only thing more important than purchasing a life insurance plan is purchasing the best type of life insurance plan that meets your needs perfectly.

Types of Life Insurance Plan in UAE

There are mainly five types of life insurance plans in the UAE:

  • Term Life Insurance Plan
  • Endowment Life Insurance Plan
  • Whole Life Insurance Plan
  • Unit Linked Insurance Plan
  • Money-back Plan

Term Life Insurance Plan

A Term life insurance plan ensures that in case of an untimely demise, your family does not have to suffer for monetary needs. In case of your untimely demise, the company will pay your family a lump sum amount irrespective of the cause of death. However, in the case of death by suicides, there can be a waiting period of up to 24 months. Term life insurance allows you to protect the financial interests of your family by offering a higher insured sum at a lower price. If possible, you should buy a term life insurance plan at a young age to earn maximum benefits since the term life insurance is expensive when buying at an older age.

Endowment Life Insurance Plan

Amalgamating the benefits of both life insurance and investments an endowment life insurance plan allows you to not only secure the future of your family but also earn profits on the savings. The premium of insurance is divided between insurance premium and investment to provide you with better returns at the end of the term of your endowment life insurance plan. If you pass away during the insurance tenure, the insured sum will be given to the nominee. In case you outlive the tenure, you will receive the maturity amount with interest.

Whole Life Insurance

Whole life insurance offers the longest insurance tenure covering you for your entire life till you are paying the premium. With whole life insurance, you can remain stress-free since your family will always have a financial backup irrespective of the time of your demise.

ULIP (Unit Linked Insurance Plan)

ULIP plan divides your premium between life insurance and market investment to maximize your earning. Offering investment solutions along with life insurance, this type of plan will allow you to save and receive insurance at the same time. 

Money-Back Plan

Similar to an endowment plan, the money-back is a life insurance plan that returns the monetary investments to you in regular intervals. Let us say that you purchased a policy 20 years. Your insurance provider will return you a fixed amount every 5 years. However, you will receive the bonus on your insurance plan at the end of the tenure of the policy.

Highlights of Type of Life Insurance with Benefits in UAE 

Life Insurance Type

Term Life Insurance Plan

Endowment Life Insurance Plan

Whole Life Insurance Plan

Unit Linked Insurance Plan

Money-back Plan

Benefits

-Lower Premium

-Insurance Plan

-No returns

-Covers all causes of death including suicide with a waiting period of 12 to 24 months

-Covers for a defined period that varies from 5 to 50 years

-Higher Premium

-Investment plus insurance plan

-Return with interests

-Covers for a defined period

-Higher Premium

-Returns on the death of the insured

-Covers for the lifetime

-Higher Premium

-Higher returns

-Insurance plus market investment plan

-Covers for a limited period

-Higher Premium

-Returns with interest

-Covers for a specified period

-Money is returned in installments usually in every five years 

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Factors That Should Be Considered While Buying a Life Insurance Plan

How to choose life insurance? Now that you know the type of life insurance plan, you should consider these factors to decide which the best type of life insurance plan is.

 When should you buy a Term Life Insurance plan?

Specific Duration

Term life insurance plan is the best type of life insurance plan for you if you are looking for a life insurance plan that covers you for a specific period of time. For instance, if you want life insurance that offers financial covers until the completion of a child’s education or marriage.

Low Investment High Cover

The premium of a term life insurance plan is comparatively lower than any other type of life insurance plan offering the same amount of cover. The most attractive attribute of a term life insurance plan is that it offers a higher assured sum at low premiums. You can purchase a term life cover of up to AED 100,000 at a premium of merely AED 7 per month. If your budget is low but you need a high assured sum to ensure that your family’s future remains secure, this plan is the best type of life insurance plan since it serves your needs offering you insurance for a specific period at a low cost.

Investing Elsewhere

Since the premium of term life insurance is considerably low, many people save money on insurance plans by purchasing a term life insurance plan and invest the remaining amount to market or other plans for higher returns. If you wish to spare some amount of your investment for life cover while investing the remaining for higher profits, this life insurance plan is the best type of life insurance for you.

When you should purchase an endowment life insurance plan?

Want assured returns

Many people hesitate in buying life insurance since they do not receive a return on their investment if they outlive the insurance span. They believe that under such circumstances, their investment is wasted without any equivalent financial benefit. If you are seeking an assured return on your life insurance plan, this plan is the best type of life insurance plan for you.

Cover plus investment

If you do not want to shell out money separately for investment and insurance, an Endowment Life Insurance plan is the best type of life insurance plan for you suiting all your requirements. Clubbing the benefits of investments and insurance, allows habitual spenders to save money while keeping them insured.

Financial Goal

People who have set financial goals such as children’s education, marriage, foreign trip, or retirement plans should opt for this insurance plan. Through an Endowment Life Insurance plan, you will be able to meet your long-term financial goal while receiving life cover simultaneously.

When you should buy a whole life insurance plan?

Lifetime Cover with Lifetime Premium

With a whole life insurance plan, you can find life insurance. However, you should purchase this life insurance plan if you are willing to continue paying the premium lifetime. In case you do not continue paying the premium, your life insurance policy will lapse and you will be returned the total amount of premium paid after some deductions. Evaluate your needs before purchasing this insurance. If you wish to have a lifetime cover, this insurance is the best type of life insurance plan for you.

Expensive Premium

Whole Life Insurance plan is the best type of life insurance plan for you only if you can afford to pay high premiums. Since the benefits on this insurance are offered only at the time of death, the savings will be beneficial for the nominee and you will not be able to use it.

When you should consider buying ULIP?

Insurance plus Investment

ULIP is the best type of life insurance plan for those who wish to save money with the insurance plan. Usually, the insured amount in ULIP is lower in respect to the premium paid. However, it offers higher returns which will boost your savings.

Lack of knowledge of Market

Seeing our acquaintances investing in the market and earning higher profits, many of us wish to invest in the market. However, we do not invest in the market directly fearing losing our money. For people who neither have knowledge about the market nor time to study market investments, ULIP is the best type of life insurance plan since it invests your money to market allowing you to indirectly invest in the market and enjoy the benefits.

Risk-free

Usually, investments in the market are subject to risk. However, ULIP investments minimize these risks since the company offers an assured sum at the culmination of your plan. Besides, experienced bankers deal with your investments directly ensuring that you never lose your money.

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When you should consider purchasing Money-back insurance?

Regular Returns

Endowment Insurance plan and ULIP lock in your money for the tenure of the insurance plan. During the tenure, you cannot withdraw money from your insurance investment and require waiting for the tenure to complete. Let us say that you purchased an insurance plan with assured returns with tenure of 20 years. Now, you will receive the amount deposited in the form of premiums at the end of the tenure. However, there are times when you need money instantly or you think that you can invest the amount in the market directly and earn higher profits. Under such circumstances, money-back insurance is extremely beneficial. Not only does it provides you life cover but also returns some part of the deposited amount at regular intervals giving your freedom to use the money wherever you wish. A money-back insurance plan is the best type of life insurance plan for those who do not want to deposit their money in lock-in plans and want the freedom to invest the money somewhere else.

Life Insurance Companies in the UAE

Some of the popular life insurance companies in the UAE are:

Conclusion

There are various types of life insurance plans. You should assess your investment plans and needs before choosing the type of insurance plan. Selecting the best type of life insurance plan for your needs can be a bit challenging. To reduce your mental efforts, we can help you in finding the best type of life insurance plans as per your needs. All you need to do is visit our life insurance page and enter your personal details. Our website will offer you plans which match your requirements perfectly. Besides, our team of experts will support you throughout the process to purchase the best type of life insurance plan. Share your requirements with us and layback while we find the right life insurance plan type for you.