– 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)
“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 firstname.lastname@example.org or call us at 04-357 3378 for a free financial health check-up.
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 email@example.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
“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:
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!
The 30’s are all about major milestones and new priorities – marriage, owning a car, having your own place, and maybe even kids! You are much older, wiser, and eager to leave the money issues of your 20’s behind you. However, there are possibilities of making mistakes that could have repercussions for the years to come down the road. Here are some financial mistakes that you can avoid in your 30’s and invest wisely instead.
1. Making debts a way of life
In your 20’s, you may have had to take on student loans, car loans and credit cards debts. But continuing to rack up debts into your 30’s, especially, that of credit cards and un-affordable mortgage can result in a downward financial spiral that is hard to recover from.
The best habit one can develop in the 30’s is to plan ahead of time and save up so that all of one’s purchases can be paid off with one’s current income and not potential income.
2. No record of daily expenses
Dubai offers both the opportunity to earn and spend. It is what you choose to spend on that matter.
Records of savings and expenditures are always a recommended practice in one’s daily life. Once a month, sit down and look at your bank accounts and credit cards to see where you have spent and how much you have spent. Keeping a close eye on expenses will not only helps you maintain discipline of keeping your outgoings less than your incoming; it will also highlight areas where you might be splurging more than you should. Perhaps, it is time to lower your restaurant bills by cooking more at home! These changes are easier to make when caught well in time before they become part of a lifestyle that is un-affordable.
3. Not saving for retirement
It is recommended that one should save at least 10% of their income for retirement. That is not easy but let that nothing holds you back from saving whatever little you can, now. Saving now matters, even though retirement is far away, because time matters. Time matters because of the magic called “compounding”. Read our blog here to learn more about the cost of delaying savings.
With so many options available for investments, Systematic Investment Plan or SIP is one great investment option where one can invest a fixed amount in a mutual fund scheme at regular intervals. SIP can lead to handsome wealth creation in the long run.
If you invest AED 1,000 a month, with the selected mutual fund scheme unit being AED 10 in the first month, you gain 100 units. The following month, if the unit price drops to AED 9, you gain 111 points and further if the unit price drops to AED 8 the gain would be 125 units. By the investment of AED 3000 over the 3 months, you are allotted 336 units. As per SIP calculator if the entire investment of AED 3000 was done in the first month itself then the units gained would have been just 300.
SIP investments can thus help grow your investments with compounded benefits.
4. Not investing in Insurance
As parents or to be parents, you always want the best for your child(ren), which is natural and healthy.
A lot of your financial and career choices are impacted by your wish to securing your children’s financial security. You know that life is complicated, unpredictable and throws challenges at us when we least expect it. So, while most of us make sure to financially protect our families while alive, we deprioritize protecting our families in case, just in case, something was to happen to us.
Life insurance is a way to protect your family financially in case of your sudden and unexpected demise. The toll of a financial loss will be the last thing affecting your family. The life insurance cover will be a means of steady financial income during hard times when your family is coping with a deep loss. Critical illness insurance and disability insurance are other options that one should consider as these can impact your income-generating ability while you are alive.
5. Letting your professional life to stagnate
In your 30’s, it is necessary to actively invest in your professional development. The pay-scale study shows that 20’s is the time for significant income growth of about 60% but as one moves into the 30’s, one can expect to see a slowdown in salary growth to about 20% over the decade. The reason for this is- additional demands outside of work such as relationships and family obligations. This is why one needs to stay on top of industry trends. One must continue looking for career opportunities and stay prepared for challenges and growth.
Your determination to keep your financial life in order while you are in your 30’s, will lead to your building real wealth that lasts. Any questions? We are happy to help!