(Almost) Everything You Need to Know About the Various “Riders” on Life Insurance Policies

Life Insurance

So, you have decided on getting life insurance for your loved ones. Fantastic!  Now it is time to get into the details and learn about “Riders.”

Riders are optional add-on coverages that you can tag on to your basic life insurance policy. Riders bring customizability to the world of insurance policies. With Riders, you can tailor the insurance policy to meet your specific needs. You can add certain benefits or limit certain aspects of your insurance policy and they only cost a fraction of the life insurance policy.

Like life insurance policies themselves, the Riders and their associated perks differ from insurer to insurer. Hence, it is always advisable to study the specific Riders offered by various insurance providers before committing to any.

Most Popular Life Insurance Riders

Now we come to the most important bit where we will discuss the different Riders that one can choose from depending on one’s needs:

Critical Illness Rider: This is one of the most sought-after benefit as lifestyle diseases are on the rise. This rider provides monetary support in case the policyholder is diagnosed with one of the listed critical illnesses such as multiple sclerosis, heart disease, cancer etc. A lump sum, as per the policy, will be granted to the policyholder regardless of the total amount required for the treatment.

Hospitalization Benefit: This Rider provides for medical and non-medical expenses for the policyholder in the event of hospitalization. A fixed benefit on a per diem basis will be issued by the insurance company. Most insurance companies typically require a minimum number of days at the hospital before this benefit kicks in.

Term Conversion Rider: Normally, Term life insurance policy only covers for a limited amount of time, ranging from 10 to 30 years. However, when the policyholder goes to get another policy, the holder may not get the same coverage benefits that they had. This arises due to the fact that the medical checkup may not make the policyholder eligible for the same benefits that they had while they were 10 or 30 years younger. Term conversion rider helps the policyholder to convert existing term life insurance to permanent life insurance without requiring a medical exam.

Permanent and Total Disability benefit: This is a living benefit wherein if an insured becomes permanently totally disabled, a lump sum is paid out to the policy holder. This benefit helps the family to cover the loss of income and bear the necessary expenses that comes with a disability. The life cover sum will not be reduced if a valid claim for PTD is presented.

Accelerated Death Benefit Rider: This rider provides a portion of the death benefit coverage for the medical bills of the policyholder if s/he is diagnosed with a terminal illness. This is very helpful for covering immediate medical bills and enabling the insured to live his or her last days with dignity.

Family Benefit Income Rider: In addition to the lump-sum an insurance policy provides to the insured’s beneficiary, this Rider provides the family of the policyholder with regular monthly income after the death of the policyholder for a certain pre-determined period of time.

Waiver of Premium Benefit: This rider helps with writing off future premiums of a policyholder if they are totally incapacitated due to a terminal illness or accident as stated within the policy conditions. The policy will continue without requiring premiums to be paid by the policyholder or policy owner.

Dismemberment Benefit: Provides the policyholder with a lump sum if they suffer a loss of limb or sight due to an accident, as stated within the policy conditions.

What riders should you pick?!

Riders are a great way to get additional benefits from a life insurance policy without having to pay the hefty premiums for stand-alone policies covering those same benefits. However, not all riders are for everyone.

Experts from New Age Insurance Brokers are here to guide you through the entire process. We partner with all major life insurance companies in Dubai to provide the right cover for you. Contact us at +971 4 3573378 or email us at info@newageib.com to know more.

5 Questions to Ask Before Purchasing a Life Insurance Policy

       –  Savitha Shetty

Buying a life insurance policy is an important financial decision. Life insurance policies, as the name suggests, are long term contracts. Hence before signing up for something that essentially lasts you a lifetime and beyond, it is imperative that one asks these 5 important questions to your prospective financial adviser.

Question 1: The insurer’s rating and claims process

Given that an insurance contract is a promissory note, it is very important to understand the financial standing and the claims process to ascertain whether the insurance company will be able to keep the promise made to pay a claim in the unfortunate event of death.

One can ascertain an insurance company’s financial standing by reviewing their ratings. These ratings are done by agencies like Standards and Poor’s or Moody’s, to name a couple. One should opt for an A rated company when purchasing an insurance policy.

Even if a company is A rated, one should enquire into the insurance company’s claims pay out process and percentage of claims paid out. Most renowned insurance companies have a simple claims pay out process and pay out majority of their claims within 5 – 10 working days of having received all required documentation.

Question 2: Financial Advisers experience and qualification

Similarly, a financial adviser’s pedagogy is very important. If the financial adviser is pursuing this role as a full-time career to start with and is armored with the requisite qualifications to provide professional advice, there is a high likelihood that you are in safe hands. In the UAE market there are many advisers but very few who pursue this as a career and are committed to providing long term quality service. In addition, many institutions like banks also act as a financial intermediary and sell insurance policies. However, many of their sales people aren’t qualified to sell Life insurance products. So, make sure that you understand your financial advisers experience and qualifications.

Question 3: The amount of Insurance required.

Life Insurance is a replacement of your income to ensure that your family continues to live in the same manner as they do today financially, in case you are not around. Hence it is important that one buys adequate amount of life cover.

The rule of the thumb is normally 7 to 10 times one’s present annual income. However, it is important to discuss your life’s present financial situation and the objective of buying the policy with your adviser. The adviser will work on these details and advise on the amount of cover required. However, you as policy buyer need to ask pertinent questions as to how this number was arrived at. Normally most advisers will base their working on the liabilities of your life, may be a mortgage payment / loan repayment, future expected major expenses, your present lifestyle to name a few important factors. Provisions made to achieve the future goals will also be factored in and a sum arrived at.

Question 4: What are the benefits in this policy and when will this be paid?

There are 2 types of policies one which is a Term Policy normally taken for a fixed term. The other is for a longer term, either an endowment or variable unit linked policy. It is important to know until what age does your policy provides cover. Does this tenure address your needs?

In addition, Term policies have no cash value and only pay out in case of death or disability as applicable. The variable unit linked policies also have cash values. Please check if this guaranteed or variable as per the market factors. Some plans do allow partial withdrawal.

If there are living benefits attached to your policy like a disability benefit or critical illness, one needs to understand the conditions under which these benefits are payable. In some critical illnesses certain terms and conditions are involved for payment of claims. One needs to ask these questions to be better informed and to avoid unpleasant surprises in the future.

Question 5: What happens If I can’t pay the premium?

Term policies have no cash values and offer a grace period to pay the premiums, if not paid by then the policy lapses. However, some variable unit linked policies do offer flexibilities, popularly called premium holiday, after a certain period of premium paying.

Life evolves and so do conditions change. It is important to know how much FLEXIBILITY these policies offer to adapt to ones changing needs.

I hope that you ask all these 5 questions to your financial adviser before you make a commitment. We at New Age Insurance Brokers in UAE, are always available to answer any additional questions you may have.

*(Please note that product features if any discussed in this article pertains to the UAE regulatory market and can vary with other markets mainly in terms of terminologies used)

What Millennials need to know about life insurance?

“Life insurance is the last thing that comes to my mind when planning for the future; after all, there are a lot of attractive investment options including investments in bullion, stocks and mutual funds.  Why should I invest in life insurance now, when I am active, hale and hearty?”

Sounds like what you or your friends would say about life insurance?

Especially when we are living longer and longer, there is a genuine question around why one needs life insurance. Let us explore the four reasons why we believe millennials need life insurance now more than ever before. Read along.

Sure – You don’t want your family to reel under debts that you procured?

As you grow older, you might acquire some form of a loan or the other. It could be an education loan, some have car loans, some have home loans etc. Due to an untimely death, the burden of these loans can fall on your family: old parents or your spouse and children, as the case may be. A life insurance policy will prevent your family from being saddled with loans they may not have planned for, and possibly cause their financial ruin.

Ensure your family’s dignified living even after death

Life insurance is an income replacement tool. Your income helps run the household, pay for education and healthcare and even help build a kitty for retirement and medical expenses that come with old age. Your untimely departure will jeopardize your family’s ability to sustain the same or a reasonable standard of living as expenses will continue but the incomes supporting that would have stopped.

Even in the case of a non-earning member of the family, there is a financial value that is attached to all the work that the spouse takes on and is responsible for. If the spouse meets an untimely departure, you should expect expenses related to child care, care of the elderly and running of the household to dramatically increase.

Thus, life insurance helps your family to lead a respectable life in case you are not around.

Employer’s Insurance – Is it enough?

Group Life Insurance plans are only now coming into vogue in the UAE.  However, even if you are employer provides this benefit, these life insurance plans remain alive as long as you are employed with that particular employer. If you leave the job or are laid off, you are automatically removed from these Group Life Insurance plans.

Additionally, workplace coverage may be more than enough as long you have no dependents. But if you have dependent parents or need to financially take care of your spouse and children, then the employer’s insurance policies typically fall short.

Cannot afford it? Think again

One of the common misconceptions surrounding life insurance is that the cost of getting insured is high.

Yes, that can be true in some circumstances but if you are young and healthy, premiums can be as cheap as a cup of coffee a day!  Unfortunately, when we are young and healthy, we assume we will always remain healthy. But health deteriorates over time, accidents do happen and we are susceptible to genetic health risks. It has been rightly said, “Good health buys you life insurance and money only pays for it” So the right time to buy life insurance is precisely when you are young and healthy.

Still unsure about getting life insurance? We understand the hesitation and perhaps you have a lot of questions that you need to be answered before you are able to make up your mind on this one. Our qualified professionals at New Age Insurance Brokers believe in educating our clients and can help draw out a financial plan that will work for you. As a leading insurance broker in UAE, having tie-ups with the most insurance companies in UAE, we will work with you to secure your future. You can e-mail us at info@newageib.com or call us at 04-357 3378 for a free financial health check-up.

Here’s How Much Money You Should Have Saved by 50

50 is an age that is considered as a threshold to sit back and reflect upon the past and consolidate your plans for the future. To feel comfortable, one should have a considerable amount of savings for both short term needs and long term retirement with an eye on financial freedom.

There is no hard and fast rule as to how much one needs for retirement and these figures vary from person to person; depending upon their present stature, future needs and how and where they want to retire amongst other factors. If someone wishes to settle in the metropolis city or abroad, they may require more in their nest egg, compared to a person intending to retire in the countryside. Similarly, someone with good health would have fewer medical bills in old age and need a smaller nest egg than someone whose medical needs are above average.

According to financial experts, an average white-collar professional in Dubai needs 6 to 8 months of present salary available to meet emergency needs; while long term savings for retirement should be targeted at AED 2 to 4 million, taking into account individual needs, inflation rates and return on savings.

If you are 50, earning AED 30,000/month, and you want to retire with USD 1 Million i.e. AED 3.675 Million in your bank account by the time you retire at the age of 65, you should have at least AED 1 – AED 1.5 Million saved as on today*

If you are not close to that number, then you need to start pumping in more towards your retirement savings. For example: Everything above remaining the same and instead of having AED 1 – 1.5 Million of savings, you only have AED 360,000 of savings as on date, you will need to start putting 23% of your income towards retirement today or delay your retirement age to after 65.

Hence it is easier to reach your retirement savings goal if you start earlier. Financial advisors such as Fidelity recommend saving 10% -15% of annual income towards retirement. Those who are not able to put aside 10-15% of their earnings now towards retirement savings should not postpone savings but start saving small amounts followed by a well-defined goal with a firm resolve to systematically save. You should gradually attempt to reach those levels by diverting pay hikes, bonuses etc., to the retirement fund. The shortfall in the earlier stages should be made good by apportioning a higher percentage towards the retirement fund, when the monetary position improves.

As been said earlier, 50’s is the time to reflect upon savings, and plan for increasing it, if required. Retirement planning is a priority that no other financial goal should snatch away. That way, you can keep yourself afloat in tougher economic conditions at old age and live a dignified life.

Your Retirement Planning with NAIB

Whatever may be said in praise of investment, the fact remains that it is not easy to ascertain what the best course of action is. New Age Insurance Brokers (NAIB) brings a wealth of knowledge and wisdom towards retirement planning with many focused financial instruments that will successfully take you towards attaining your retirement goal.

Feel free to call us at +971 4 3573378 or e-mail us at info@newageib.com to make an appointment with an advisor.

*assumptions include: annual inflation and income increase of 4%, return on investment at 6% and 50% of income replacement required at the time of retirement

Cost of Delaying Savings in Your Life

“Start NOW with what you have”

“The eighth wonder of the world is compound interest,” rightly said by none other than Albert Einstein. Most of us live with this mindset that it hardly makes any difference if we don’t begin saving right away. However, time has a drastic impact on one’s financial well-being. Simply put, if we start early, we will always stand to gain significantly more. Let us see how:

Example:

Suman is 25 years old and has decided to retire at the age of 60. Suman can start saving now or postpone it to a later date. Assuming that the return on investment is 10%, following is the impact of delaying savings:

Suman is short by almost AED 2.5 million by the time of retirement! A significant cost of delaying saving just AED 1000 per month for 10 years!

Even if Suman decides to increase his monthly investments in the second and third scenarios with an aim to see that at least the total investment remains same across all the three cases, even then, he is unable to catch up due to lost time.

Delaying savings by even one year reduces your wealth by almost AED 500,000 by the time retirement comes along. Think about that! Moral of the story is, save now, even if it is small – compounding is your friend and it needs time.

If we have convinced you to start saving today, then the next obvious question is how to save?  Keep it simple is our mantra.  Based on your risk appetite, regular investments in the stock market through ETFs or Mutual Funds over a long period of time, has the potential to translate to reasonable sums of money. Using Systematic Investment Plan (SIP) makes life easier as the amount gets auto-debited from one’s bank account on a fixed date. It removes decision-making from your hands and forces you to save in a disciplined way.

Patience is a virtue and one should stick with regular savings to see the benefits of early investing. Avoid withdrawing your investments mid-way thinking that they have earned decent returns. The fact is, returns start to compound over time and more money makes more money. Any questions? New Age Insurance Brokers in Dubai are happy to help!