What UAE expatriates must consider when purchasing life insurance
By Joseph Terrance, Head Life Insurance Business, Policybazaar.ae
Understanding your financial objectives is not just important; it is vital when purchasing life insurance as a UAE expatriate. This involves identifying your beneficiaries and the financial obligations you must cover, such as mortgages, children’s education fees, and daily living expenses. This understanding will empower you, putting you in the driver’s seat to make the right decision that aligns with your financial goals and ensures the security of your family.
This understanding will guide you in choosing the right policy to align with your financial goals and ensure the security of your family.
Additionally, you must determine the duration of coverage, whether it should be for a specific period through term life insurance or your entire life via whole life insurance.
Once your objectives are clear, the next step is to consider life insurance policies. Thorough research is not just essential; it’s the key to understanding the available policies and how they align with your goals. This knowledge will give you the confidence to make an informed decision that best suits your needs.
Term life insurance provides coverage for a specific period and is usually less expensive but lacks a cash value component. Whole life insurance offers lifelong coverage and includes a savings element, albeit at a higher cost. Universal life insurance provides flexible premiums and death benefits while building cash value. In contrast, variable life insurance allows the cash value to be invested in various options like stocks and bonds.
Currency considerations
A crucial decision for UAE expatriates is whether to invest in life insurance policies denominated in AED or US$.
If your income and major expenses are in AED, having a policy in the same currency might be beneficial to avoid exchange rate fluctuations. Conversely, plan to relocate to a country where the US$ is more prevalent or has significant expenses in US$. A dollar-denominated policy might be more suitable due to its stability and protection from local currency depreciation.
Considering global funds for the investment component of your life insurance policy is not just an option; it is a smart move. It can provide diversification, higher growth potential, and a hedge against local currency fluctuations, giving you a sense of security and preparedness for the future.
Investment diversification
Diversifying your investments across different regions and industries can reduce risk and increase returns, offering long-term financial stability.
Considering these considerations, comparing different life insurance products is the next step.
Assess the premium costs, coverage amounts, policy terms, and the reputation of the insurance providers. Ensure the premiums are affordable, the coverage amount is sufficient to meet your financial obligations, and the terms and conditions align with your needs.
Research the insurer’s economic stability and customer service record, and consider additional coverage options like critical illness riders.
Financial advisor
Consulting with a financial advisor can provide personalised advice tailored to your financial situation and goals. An advisor can explain complex terms, help you understand policy features, and offer insights into various products from different insurers.
Life insurance policies should be regularly reviewed and updated to reflect significant life changes such as marriage, the birth of a child, or purchasing a home. This ensures that the policy meets your needs, with adjustments made to coverage amounts, beneficiaries, or policy riders as necessary.
Understanding your financial objectives, choosing the right type of policy, considering currency and investment options, and consulting with a financial advisor can help you make an informed decision.
Regularly reviewing and updating your policy ensures ongoing financial security for your loved ones. A well-chosen life insurance policy is a cornerstone of a solid financial plan, providing peace of mind and protection for your family, no matter where life takes you.
Featured image: Life insurance policies should be regularly reviewed and updated to reflect significant life changes. Credit: Merve
