In Dubai, health insurance is mandatory, but residents are not required by law to insure their lives. However, with this pandemic an ever-increasing number of Dubai residents are seeing the emotional and financial havoc death can cause to a family. Hence there is a growing recognition of the significance of buying a life insurance policy.
Life insurance companies in Dubai can protect your family from financial difficulty due to the premature loss of an income earner or the stay at home spouse. Choosing the right policy for your specific need can be confusing with the range of options and providers available.
Buying life insurance in Dubai is not without its pitfalls. Mistakes can lead to situations where the expected payout doesn’t materialize, or it might not cover all the angles or meet all the requirements. Here are some of a few common mistakes that you need to avoid when buying life insurance in Dubai.
- Not doing a proper financial plan
Buying an insurance policy without thoroughly assessing your current financial situation and your future financial obligations is a mistake that generally everyone makes. It is highly unlikely that you will get the appropriate cover for your specific needs if one does not sit down and properly calculate the various financial commitments that would need to be fulfilled in case of death. Also, without a proper financial plan, one would not be able to identify the right budget to set aside for this project. Hence, before selecting a product or a cover, one should sit down and prepare a proper financial plan.
- Choosing the wrong type of policy
Before buying life insurance in Dubai, you need to understand the different types of policies available. A term policy pays out a specific death benefit and runs for a set period, e.g. for a 20-year policy, one pays for 20 years and gets a cover for 20 years. On the other hand, a permanent life insurance policy stays in place indefinitely throughout life and allows you to build cash value that can be drawn against later.
A term policy is ideal if you want a low-cost cover and don’t expect any returns from the policy. A decreasing term policy is a sub-set of a term policy wherein the cover reduces over a period of time. This policy is typically suitable for a mortgage. A permanent policy is an excellent choice if you want a plan that will earn some returns on your investment.
- Not reviewing the insurance policy on a periodic basis
People think that they have to buy a policy once and never have to look back and that is incorrect. As you go through various stages of life, your insurance need will change. So, reassess your insurance needs with every significant change in your life such as a marriage or having a baby. This will ensure that your coverage matches your actual requirements.
Also, in case of a permanent life insurance policy, one should periodically assess how funds in the portfolio are performing and if any adjustments need to be made before it is too late.
- Treating insurance as a short-term investment
Treating life insurance exclusively as an investment and expecting rapid returns is not advisable. Exiting the policy far in advance of the maturity date can potentially result in significant surrender costs. Hence, you should treat life insurance policy as a long-term financial commitment and have the discipline to stick with it.
- Only comparing rates
Firstly, people make a mistake of choosing a policy based on the lowest price they see, opting for less benefits than they actually require, and that leaves their dependants out of pocket in a time of need.
Thus, the cheapest plan based only on your age and desired payout sum may not serve you in the long term. It is essential to compare rates and the benefits from several insurers and assess the difference in coverage. After that, review your budget to see what you can cut back on, rather than choosing less than sufficient coverage.
Buying a life insurance policy without reading the fine print can lead to disappointment later. For e.g. when you find that the premiums you have paid on a term policy did not accrue cash value. Therefore, it is best to consult professional insurance brokers, ask a lot of questions and ensure that you understand the benefits of the policy you are buying before signing.