WHY LIFE INSURANCE?
Finding the right life insurance is not easy. That’s why it is very important that you tailor your life insurance so that it will fit your needs for the rest of your life. This topic does not generally appeal to most people, as they would rather not think about the situations which would warrant an insurance. Unfortunately, death, accidents and critical illnesses are a harsh reality that affect people in certain situations which can be in or out of their control. According to a major life insurance provider in the UAE, the average claimant is 50 years old for life cover and 48 for critical illness. Typical reasons for the claims are heart attack/stroke, cancer and road accidents.
*Source: Zurich Middle East
WHO NEEDS LIFE INSURANCE?
Dubai residents most in need of life insurance are in the working age (25-60 years) with dependents (spouse/children/parents) who rely on their income. 92% of residents have at least one dependent.
*source Dubai statistics center
WHAT HAPPENS IF YOU DON’T HAVE LIFE INSURANCE?
What happens if death occurs in the UAE to Dubai expats? The first step is that your bank accounts will be frozen and/or your company accounts as well in case you own a company. This is standard procedure and it takes at least 3-6 months until your bank accounts are unfrozen. If your dependents don’t have access to other sources of funds in the short term, they can have difficulty paying the bills, or might need to relocate elsewhere. The second step is that in case you don’t have a UAE will, your UAE assets will be divided by a Sharia court. This means that for example the share of the widow is one-quarter in the absence of a child or grandchild, and one-eighth if there is a child. This might be very different than the standard allocation in your home country.
If your family is relying on your income, there will be an income loss for the family and initially a higher cost to take care of the funeral and related necessary arrangements. Can the standard of living of the family continue the same way as it used to be? Can future costs like university education for your children still be paid for?
WHAT KINDS OF LIFE INSURANCE ARE THERE?
If you think you need a life insurance, it is important to find the right one. Life insurances fall under two categories, term life insurance which is temporary, and whole of life insurance which is permanent. In an example of term life insurance, you could take a 25 year life insurance cover of $1M. In case death occurs within 25 years after taking the policy you can claim the amount. A whole of life insurance is the only kind that will cover you your entire life. There is also a capital build up in your policy which allows you to get money back in case you stop the policy before you reach your term.
There are other benefits which you can add in your life insurance such as critical illness cover, permanent and total disability, long term care, hospitalization, dismemberment and waiver. These are additional benefits in case death doesn’t occur. For example, if you are diagnosed with cancer, you will receive a lump sum of $250,000 to pay for your bills and for being unemployed. According to UAE law, if you have a long term illness you will receive 50% of your salary after 15 days and 0% after the next 15 days. After 30 days your company is legally not obliged to pay you any more salary.
There are many risks involved for Dubai expats when death occurs. Your bank account will be frozen and your family might not receive the right inheritance. This is in addition to the fact that your family will suffer financial distress due to the loss of income.
Making sure that you design your life the way you want will give you peace of mind. I have worked with many customers who have been relieved and proud after they received their life insurance policy. It was as if a burden fell off their shoulders. Unfortunately many concerned residents just don’t know where to start and who to ask about the process. We have an obligation to inform our fellow residents about the pros and cons of being a Dubai Expat.
Posted on Sun, October 29, 2017
by Simon Snelder filed under