Life insurance – It’s not something you want to worry about, especially when you’re young and healthy. But really, this is exactly the time to consider it.
Not only does life insurance help pay off your debts and ease the financial burden of those left behind to settle your estate after you, but also helps with wealth creation during your lifetime. Why does everyone suggest starting early? Simply because the younger and healthier you are – the cheaper it is.
So if you’ve decided to get insured, you need to ask about what the different types of life insurance are. And with that question, come more questions. Here’s a simplified guide to help you make sense of all of it.
What are my life insurance plan options?
This plan is as plain vanilla as it can get. You choose a fixed number of years for life cover, pay premiums for each year. There is no savings component. When the term is up, you stop paying premiums and no longer have coverage.
Some plans allow a renewal or conversion to a whole life plan.
Why go for it: Affordability.
What’s the catch: If the policy holder dies after the term ends, beneficiaries get nothing.
Whole Life Insurance
As the name suggests this plan covers your entire life, as long as you pay premiums. In addition to death benefit, you can accumulate a cash value that is guaranteed to grow a certain amount each year.
Why go for it: You can borrow against the cash value. Useful during emergency expenses.
What’s the catch: Significantly higher premiums than term plans – for the same death benefit. Upon death if there is any accumulated cash value, it does not get added to the death benefit- goes back to the insurance company.
Somewhat similar to term plans, with the critical difference being – maturity benefit. Unlike term plans which pay out only in case of an eventuality over the policy term, endowment plans pay out in both – death and survival. Some sub types:
- Unit linked insurance plans (ULIPs) are linked to markets, like a mutual fund. You can choose the allocation for investments in stock/debt markets.
- Money back policies offer periodic payments of a portion of the sum assured during the policy term. On survival of the term, the policy holder gets the balance sum assured. In case of death over the policy term, the beneficiary gets the full sum assured.
Why go for it: A good option for those looking for a combination of investment and insurance.
What’s the catch: Higher premiums compared to term insurance.
Other life insurance options include:
- Pension plans which help you build a retirement plan. In case of an eventuality, the nominee can take either a lump sum or receive a regular pension for the rest of the policy tenure.
- Universal Life plans which allow policy customization. You can integrate investment options or “riders” such as Critical Illness Cover, Income Protection, Disability and Accidental Death.
What policies are available in the UAE?
We list a few examples of life insurance policies being offered by insurers and brokers in the UAE:
HSBC Whole of Life Futura – A whole life plan in tie up with Zurich International. Customize and add benefits to the plan; Pay premiums on a monthly, quarterly, half yearly or yearly basis in multiple currencies.
MetLife Term Insurance – Coverage up to USD 5 million; Add accident or disability coverage; Choose a term of 5, 10, 15, 20 or 25 years; Pay premiums on monthly, quarterly, half yearly or yearly basis in multiple currencies.
MetLife Life Care – Coverage up to USD 10 million; 10% increase in coverage every five years; 2% cash back every year after 10 years.
NBAD Secure Life – In tie up with ADNIC. Plan 1 covers accidental death and partial or total disability due to accidents. Plan 2 covers natural or accidental death in addition to partial or total disability due to accidents.
Emirates Islamic Takaful Emarat Secure Life Plan – Minimum term of 5 years and minimum monthly premium of AED 500 or USD 150; Benefit up to the age of 85 years; Surrender policy early without penalty; Add benefits; Increase or decrease premium value.