What Is Insurance: Guide to Insurance in the UAE 2025

It acts as a financial safety net that protects you and your loved ones in difficult times. Whether it is providing long-term stability through life insurance or supporting medical expenses through health coverage, the right policy ensures that your family’s well-being remains secure no matter what life brings.

For example, term life insurance in the UAE offers coverage for a fixed period, ensuring your family receives a payout if something happens to you during that time. It's affordable, practical, and crucial in a place where expat families often rely on a single income. Understanding insurance helps you make smart decisions to protect your future in a fast-paced, global hub like the UAE.

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Defining Insurance: An Overview

An insurance is an agreement between you and an insurance company. Under this agreement, the company protects you and your loved ones against any financial losses that occur because of the uncertainties in life, including illness, accidents, natural disasters, etc.

The insurance contract is known as a policy. This document outlines:

Who and what is included in the contract
The situations under which a claim will be made
Who will receive the money
How much money will be paid

Components of Insurance Coverage
Sum Insured – The maximum limit on the costs for which you are covered in case something unforeseen happens in the policy period. It is also applicable to items you have insured. Sum Assured – It is the amount the life insurance provider pays to the nominee if the insured passes away. This term is specifically for life insurance plans. Maturity Value – This is an amount under some life insurance policies that is paid by the insurance provider if the plan matures. Premium – This is the amount that the policyholder pays to keep insurance coverage active. The factors influencing the premium include health, age, lifestyle habits, and more. Deductibles – These apply to general insurance policies, like car and health insurance. This is an amount paid out-of-pocket before the insurance claim kicks in.

Components of Insurance Coverage

Sum Insured – The maximum limit on the costs for which you are covered in case something unforeseen happens in the policy period. It is also applicable to items you have insured.
Sum Assured – It is the amount the life insurance provider pays to the nominee if the insured passes away. This term is specifically for life insurance plans.
Maturity Value – This is an amount under some life insurance policies that is paid by the insurance provider if the plan matures.
Premium – This is the amount that the policyholder pays to keep insurance coverage active. The factors influencing the premium include health, age, lifestyle habits, and more.
Deductibles – These apply to general insurance policies, like car and health insurance. This is an amount paid out-of-pocket before the insurance claim kicks in.

Different Types of Insurance

Type of Insurance	Description
Health Insurance	Mandatory in many UAE emirates. Covers medical expenses such as check-ups, emergency treatments, and may include add-ons like dental or vision. Often includes deductibles and co-payments, but preventive care is usually fully covered.
Life Insurance	Offers financial protection to your family in case of death. Term plans provide coverage for a fixed period, while permanent plans last a lifetime with continuous premium payments.
Travel Insurance	Covers unexpected travel-related expenses like cancellations, medical emergencies, or lost luggage. Coverage for pandemics or extreme sports may require specific mention in the policy.
Car Insurance	Mandatory in the UAE. Third-party covers damage to others, while comprehensive insurance also protects your own vehicle from theft, accidents, and disasters. Typically requires annual premium payment.
Home Insurance	Covers damage to property, personal belongings, and liability within your home. Protects against theft, fire, and vandalism; additional coverage may be required for natural disasters like floods or earthquakes.

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Features and Benefits of Insurance Coverage

We have outlined some key features of insurance coverage —

Risk Coverage – This is the main purpose of insurance. It offers protection against unexpected events such as accidents, illnesses, property damage, or loss of life by covering related expenses.
Premium Payment – To keep the insurance policy active, you must regularly pay a premium. The amount depends on factors like your age, health, risk level, and the coverage you choose.
Claim Settlement – When a covered loss occurs, you can file a claim to receive financial help. Quick and fair claim settlements are a major benefit of having insurance.

The following are the benefits of insurance coverage —

Financial Protection – Life insurance helps secure your family’s future in case of your untimely death.
Medical Expense Cover – Health insurance pays for hospital bills or offers cashless treatment, easing financial stress during health emergencies.
Wealth Growth – Investment-linked plans like ULIPs offer market-based returns to help grow your savings.

Principles of Insurance
There are three main types of principles of insurance, including — Principle of Indemnity – According to this principle, the insurance provider only pays the amount that the insured has lost. Principle of Utmost Good Faith – This principle highlights the importance of both parties, that is, the insurance company and the insured, must act in good faith when signing the insurance contract. It means that they both need to disclose all the relevant information related to the policy. Principle of Insurable Interest – This principle means the insured must have a financial or personal interest in the person or property covered. They should face a loss if it gets harmed, damaged or destroyed.

Principles of Insurance

There are three main types of principles of insurance, including —

Principle of Indemnity – According to this principle, the insurance provider only pays the amount that the insured has lost.
Principle of Utmost Good Faith – This principle highlights the importance of both parties, that is, the insurance company and the insured, must act in good faith when signing the insurance contract. It means that they both need to disclose all the relevant information related to the policy.
Principle of Insurable Interest – This principle means the insured must have a financial or personal interest in the person or property covered. They should face a loss if it gets harmed, damaged or destroyed.

How Does Insurance Work?

Simply put, you pay a regular premium (usually monthly) to your insurance company, and in return, they help cover the costs of approved services like doctor visits, car or home repairs, and more. Once your plan is active, you’re covered until you stop paying or the policy ends. Depending on your plan, the insurer may pay the service provider directly or reimburse you. However, in some cases, you must first pay a certain amount out of pocket, called a deductible, before the insurer begins covering costs.

Where to Buy the Best Insurance in the UAE? You can effortlessly find the best insurance in the UAE only on Policybazaar.ae. This website is a one-stop platform that hosts a plethora of insurance options ranging from life insurance to general insurance. Click here to buy the plan now!

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