Why is the Annual Income Main Factor for Term Life Insurance in the UAE?

By Krunal Gandhi
  | Published: 26 October 2021

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Being simple and basic, term life insurance in UAE is one of the most affordable insurance plans. What makes it even more popular is its convenient application and a higher claim settlement ratio. During the insurance application, you need to submit a few proofs and, your annual income statement is a compulsory document among all. Whether you are buying term life insurance online or offline, you need to furnish your income proof for a few reasons. For example, your insurer decides the coverage amount based on your earnings and expenses. Not only this, but your income also acts as a guarantee against your insurance amount. The following article lists down the reasons why annual income is the main factor for deciding your term insurance in UAE.  

Why Annual Income Is a Deciding Factor for Term Insurance in UAE?

As a primary eligibility criterion, your insurer would ask for your annual income while deciding whether to offer you term life insurance in UAE or not. It is for the reason to ensure that you get enough protection according to your lifestyle and expenses. Also, your life insurance acts as an income replacement for your family after your demise, and it is imperative to have adequate coverage. Your salary helps the insurer to calculate the approximate coverage amount. 

Additionally, your annual income shows your capability of paying the insurance premium timely. It is also the reason why insurance companies in UAE prefer salaried individuals over self-employed. 

The insurance provider assesses your financial situation through your income projection, earning capacity, and overall expenses. It shows them how conveniently you can manage to pay your insurance premiums. Apart from your salary, the insurer also considers years spent in the job, designation, job risk, and seniority. A risky and unstable job may deny your application or affect your ixnsurance premium. However, all the other factors are considered only after the disclosure of your annual income. 

Your financial statement also secures the company against over-insurance. An over-insurance is an excess cover than the cash value of your life Insurance policy. An insurance plan aims for your financial security and not for profit creation. Over-insurance can be a loss to the insurance providers and also create a moral hazard by motivating individuals to make a profit with intentional losses. 

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How Does Your Annual Income Affect Your Term Insurance in the UAE?

Term insurance coverage directly depends on your annual income. As already mentioned, the insurance company calculates the risks you possess based on your salary and financial condition. Your income helps insurers determine your premium and the total coverage amount. Depending on your salary and expenses, the insurance company decides the monthly premium and the term of your premium payments. 

The more income you have, the more insurance coverage you would get to compensate your family’s lifestyle and expenses. A stable salary with fewer expenses can ensure you better coverage with discounted premium costs because it ensures regular payments without delays. On the other hand, if you have an unstable income, your insurer may increase your premium cost to compensate for the risk of non-payment of premiums. They may also deny you a term insurance plan in UAE if your salary fluctuates too much. 

Apart from the above, they may also consider your employment type. An individual with a seniority position is less likely to involve in risky work and thus has a lesser chance of filing a claim. It would eventually reduce the premium and also help them secure a decent coverage amount. 

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Can You Choose Not to Disclose Your Annual Salary While Buying Term Insurance in the UAE?

An annual salary statement is a mandatory document while buying term life insurance in the UAE. Since numerous insurance conditions depend on your earnings, you cannot deny submitting your annual salary statements. 

Your insurer would ask you to furnish the salary statement at the beginning of the insurance application so that the underwriters can estimate your coverage amount that is adequate for salary replacement after your demise. A non-disclosure of annual salary would reject your term insurance application. Hence, if you are planning to buy a term insurance plan in UAE, start collecting your salary slips and other related documents. 

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Conclusion

To buy a term insurance plan in UAE, you need to submit your annual income statement. It not only determines adequate coverage for your family but also secures the insurance provider from moral hazards due to over-insurance. An insurer can get into huge losses due to false claims and intentional damages caused by the policyholder to gain profit. Your annual salary is also crucial for determining the risk and convenience of premium payments. Therefore, before applying for a term insurance plan, keep your annual salary statement and other related documents handy. 

If you have any more queries regarding term life insurance, you can always contact our support team.

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Krunal Gandhi
Krunal Gandhi0 Post

Hi there, myself Krunal Gandhi. I have five years of experience in the content industry and have worked in diverse fields such as sports, technology and education. I'm a sports enthusiast who loves watching Cricket and Tennis. I also like to watch web series and movies having good content – after all, 'Content is King' and it's applicable everywhere.