Mandatory Mortgage Life Insurance in UAE: Cost, Requirements

Let’s understand why the requirement exists, the common types of mortgage life coverage, the benefits for borrowers and families, and how to obtain a life insurance home loan UAE.

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Do You Need Life Insurance for a Home Loan UAE?

Yes, life insurance is mandatory for mortgage approval! Banks either require you to take the bank’s life policy or present an equivalent policy from an approved provider.

It’s important to understand that the policy’s purpose is straightforward. It ensures that the outstanding mortgage balance is paid off if the borrower dies during the loan term. This shields the borrower’s family from financial burden and also protects the lender’s interests

Why Do You Need Life Insurance for Mortgages in the UAE?

Primarily, there are two main reasons why banks insist on mandatory life insurance for UAE mortgages — lender protection and borrower/family protection. From the lender’s end, life cover reduces credit risk by ensuring the loan can be repaid if the borrower passes away.

Secondly, from the borrower’s side, the policy prevents the borrower’s heirs from inheriting an unpaid debt. If there is no income or assets to repay the loan, it can lead to the sale or loss of the home without life coverage.

Types of Life Insurance for Home Loan UAE

Understanding the different types of insurance helps you choose a policy that matches your finances and goals.

1. Level Term Insurance

Level term, also called fixed-sum term coverage, pays a fixed lump sum if the insured passes away during the policy term. Premiums are fixed for the policy term. You can use level term policies to cover the mortgage and also provide additional cash to dependents beyond the loan amount.

2. Decreasing Term Insurance

The decreasing term is the most common policy used for mortgages.

The policy’s sum assured declines over time in line with the decrease in the outstanding loan balance. Premiums usually remain level while the benefit reduces. As the insurer’s exposure decreases, premiums are generally lower than for level term cover with the same initial amount. This makes it a cost-efficient option for borrowers if their primary concern is paying off the loan.

3. Whole Life Insurance

As the term says, a whole life policy provides lifelong cover and may include a savings or cash-value component. It’s not commonly used only to secure a mortgage because it’s considerably more expensive. Still, some borrowers choose whole life for estate planning so that they can leave funds to beneficiaries that both pay off the mortgage and provide an inheritance.

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What are the Inclusions of UAE Mortgage Life Insurance?

Your home loan life insurance policy covers you against the following —

Loss of life due to illness and accident
Permanent Total Disability (PTD) due to illness and accident

If you’re unable to repay the mortgage due to any of the two reasons above, your insurance steps in. It pays off the outstanding amount to the lending bank.

Exclusions of Home Loan Life Protection UAE

In certain circumstances, you cannot claim your mortgage insurance. Some of the major exclusions are —

Self-inflicted or self-harm injuries
Invasion, civil wars, strikes, riots, revolution, terrorism, or other warlike operations
Death due to suicide
Any pre-existing condition for which the insured received treatment within 1 year before enrollment

How Does Mortgage Life Insurance Work?

When you take mandatory life insurance for UAE mortgages, your policy pays the remaining loan amount to the bank if something happens to you — death or PTD. This saves your family from the risk of losing the property due to unpaid loan.

The premiums are paid monthly or annually. The frequency and the rates depend on several factors, such as the repayment period, your age, health status, loan amount, and more. If you choose a reducing term policy, the coverage amount decreases as your mortgage balance decreases over time.

How Much Does Mortgage Life Insurance Cost in the UAE?

Just like any other insurance type, the mortgage life insurance costs vary as per several factors.

If you take a standard life policy, you can expect plans to start from around AED 50/month* for AED 1 million coverage. However, keep in mind that the actual prices may vary as per your age, existing health conditions (if any), and more.

If you take the insurance that comes with your mortgage, the premiums could be around 0.01 to 0.02% of the outstanding amount. This, again, varies as per the bank.

*T&Cs apply

Know Your Eligibility For Mortgage Life Insurance in the UAE

The general entry requirements for home loan life protection UAE are identical to mortgage requirements. Here are the major criteria —

The minimum age is 18 years
You must be a UAE resident

Note: Additional eligibility may apply.

What are the Advantages of Home Loan Life Protection UAE?

Mandatory life insurance for UAE mortgages comes with a plethora of privileges. Let’s take a look at the key ones —

Debt protection for your family: The primary advantage is financial security for dependents. In case of the borrower’s untimely death, the outstanding loan is paid. The property is then automatically handed over to the family.
Faster approval and convenience: UAE mortgage life insurance can speed up mortgage processing since the insurer and bank have a pre-approved process.
Cost efficiency (with decreasing term): Decreasing-term policies align with the declining loan balance and are generally cheaper than level-term policies for the same initial cover. So if you don’t want a standard life plan, you can always choose this option.
Estate planning: A level-term or whole-life policy can provide additional funds beyond the mortgage, making it a source of income or inheritance.

How Can You Get Mortgage Applicant Life Cover UAE?

There are two ways through which you can apply for life insurance for a home loan —

Through your bank: Many borrowers buy a mortgage life policy offered by the lending bank as part of the mortgage package. Banks give this option at approval and handle premiums through the loan or salary deduction.
From an approved external insurer: Some banks allow borrowers to provide an equivalent policy from an insurer approved by the bank. If you prefer a specific insurer or want a different product, ask the bank what evidence and wording they require.

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Mortgage Life Insurance v/s Regular Term Insurance: What’s the Difference?

The table below explains the difference between a UAE mortgage life insurance and regular term insurance —

Factors	Mortgage Life Insurance	Regular Term Insurance
Purpose of Coverage	Exclusively to pay off your outstanding mortgage in case of your untimely death or Permanent Total Disability (PTD)	Offers a lump-sum payout to your dependents — the sum can be used for daily expenses, children’s education, and more
Amount of Coverage	Keeps decreasing as you keep paying your mortgage	Fixed amount throughout the policy term
Beneficiary	The bank/ lender	A family member or any assigned beneficiary

Frequently Asked Questions

Yes, you can use an existing life plan for mortgages. However, the policy must meet the bank’s requirements.

Yes, both expatriates and Emiratis taking a bank mortgage are required to buy life insurance.

You, the mortgage borrower, have to buy life insurance and pay the premium. In case you go with the lending bank’s insurance, the premium will be added to your instalments.

Yes, if it is a joint loan, most banks cover both spouses in a home loan life insurance policy.

Generally, critical illness coverage is not included in a home loan life protection plan. However, it’s advisable to ask your provider about the coverage.

In the event of Permanent Total Disability, the provider pays off the remaining loan balance to the financial institution. This way, the borrower's family keeps the property.

Generally, in most plans, pre-existing conditions are excluded before policy issuance. Confirm with your insurer before buying a policy.

No. If you settle the loan early, you won’t receive a refund of a portion of your premiums paid in most cases.

Once you’ve fully settled your mortgage, your life insurance policy also gets terminated. However, this is true only for the insurance coverage offered by the lending bank. If you got a separate policy, it can continue if you’d chosen a tenure beyond the mortgage period.

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