Term Insurance Plan in UAE: An Overview
A term insurance plan in UAE is the most affordable and the simplest tool to help one in protecting the loss of income.
A term insurance plan can be seen as almost like renting life insurance coverage for a fixed period of time. It is way more affordable as compared to a whole life insurance policy or an endowment plan. However, it also does not have any cash surrender value attached to it.
These plans can help you in availing sufficient coverage at pretty low premium charges.
Types of Term Insurance Plans in UAE
In UAE, a policy seeker can get two types of term insurance coverage:
1. Level Term Insurance Plan
This type of term life insurance plan offers the same amount of payout throughout the tenure of the plan. The beneficiaries of the policyholder will receive the same fixed amount of sum assured regardless of whether the insured individual passes away on the first day of the policy or the last day. With a level term policy, the premium payments are fixed for the entire term of the plan, and death benefit for a claim will be paid by the provider if a death occurs during the tenure of the policy.
This type of term policy is taken out for a fixed tenure and is generally used to provide a sense of security to the beneficiaries for up to a certain age. There are insurers like Noor Takaful, Salama, Metlife, among others that provide this type of term insurance.
They also offer add-on riders such as permanent total disability, waiver of premium, critical illness, etc.
2. Decreasing Term Insurance Plan
The cover amount of this policy reduces every year by a fixed amount, and by the end of the plan, it reaches down to zero. The premium payments on this kind of policy are generally lower than the other kind of term plan i.e., level term plan because the cover amount reduces with the term.
People usually opt for this type of term insurance policy in order to protect a debt such as a mortgage, wherein the cover amount reduces with the outstanding amount on the mortgage. This type of term insurance plan in UAE is less expensive as compared to a level term insurance plan in UAE.
Insurance providers such as Metlife, Noor Takaful, Salama, among others provide this kind of term life insurance.
The Features of a Term Insurance Plan
Below summarized are the common features of a term insurance plan in UAE:
Choice of Add-ons
You can buy a term insurance plan in UAE with a few additional riders to enhance the scope of coverage of your policy. Some of the riders offered by the insurance providers are:
- Critical Illness Rider
- Permanent and Total Disability Benefit
- Accidental Partial or Total Permanent Disability
- Accidental Death Benefit
- Passive War Rider
- Waiver of Premium Benefit
- Family Income Benefit
- Forever Benefit
Choice of the Term of the Policy
You can choose the tenure of your policy as per your needs for protection, for instance, 10 years, 15 years, or 20 years. Some insurance companies offer the policyholder coverage for a term of up to 100 years.
The length of the coverage should be as per the basis of the number of years that you wish to protect your income, along with the age of your beneficiaries and the period for which you will be required to support them. Other factors like your age for retirement also come into play.
Seeking advice from a financial advisor can be a good idea to determine the term that is ideal for coverage.
The Younger You Are the Cheaper It Is
The premiums charged on a term insurance plan in UAE are lower when a plan is availed at a younger age, and the premium charged increases with the age of the individual. Hence, it is advisable for the younger generation out there to avail a life cover that equals at least 10 to 15 times their annual income as soon as they can.
Doing so will ensure that your life coverage policy is offered to you at a low premium that is locked in when you buy a term insurance plan.
Joint Coverage or Single Coverage
A policy seeker can avail a term insurance plan either on his or her own individual life or on a joint life basis with their life partner, business partner, or a property owner.
No Surrender Value
These types of life insurance plans have no maturity value or cash surrender value if the policyholder survives the term of the coverage policy. A term insurance plan is a pure protection scheme that aims at providing a large cover at affordable low premiums.
How Are The Premiums on a Term Insurance Plan in UAE?
The premiums charged on your term insurance plan are based on a few factors such as:
- Your age
- The current state of your health
- The amount of coverage that you wish to choose
- The term of the policy opted for
- Any add-on riders that are selected
- Your nationality
- Your BMI
- Any travel history that you may be having along with any travel plans for the future
Limitations of Term Insurance Plans
The only limitation of this type of a life insurance coverage policy is that if the insured individual i.e. the policyholder survives the term of the policy, then he or she is neither covered nor does he or she get any sort of return from the term insurance plan.
There are many future scenarios and circumstances that need to be taken into consideration very carefully when you are deciding the tenure you want to be covered via such policies. If you opt for a plan that is shorter than what you need, you are putting the income of your family or any commitments they have at risk. Whereas, if you choose a plan tenure that is longer than what is desired, you will end up in a situation wherein you are paying premiums more than you should.