All you need to know about Term Insurance

Term Insurance is a form of life cover which provides for the coverage for a specific period of time. During the term of the policy if an insured person expires then the policy benefits will be provided to the nominee. It is a life insurance that provides coverage during a specified period. There are different term plans which are designed to cover the insurer and provide security to the family if there is any uncertainty. To initiate and continue the term insurance the policyholder should pay the premium according to the plan chosen. There is a specific amount of coverage provided during the term of insurance. 

Do you need term insurance in the UAE?

One of the most important decisions in one’s life is planning for the future of the family. When you buy the insurance you are securing the future of the family especially in countries like the UAE where the cost of living is very high. The importance of Takaful has been realised in the UAE. The following are the reasons why you should have term life insurance in the UAE.

  • The term life insurance is less priced than other life insurance policies.
  • In case of any sudden demise, the family can get financial support.
  • The policy benefits can be issued according to customisation of the insured either lump sum payment or monthly payments. 
  • The premiums amounts are comparatively less, the amount which is saved can be utilised for child future education, purchasing assets, plan for retirement and others. 
  • In order to increase the basic insurance, the term insurance can be added to other riders. These riders are permanent disability, critical illness cover, accidental death and others which can be purchased at extra cost. 

What is included in the term life insurance?

The following are usually covered under the term life insurance. 

Family Takaful– Family takaful is provided as inbuilt terminal illness protection offered by some of the insurance companies.

Protection to the dependants- If there any disability which would result in losing the monthly income where insured is the only person earning in the family. According to the term insurance, the policy pays a lump sum amount on a regular basis. The amount can be utilized for paying the expenses.

Unforeseen event payments- The family members can get the financial benefit in case of any unforeseen events like sudden demise. The policy benefits are provided to the family members. 

Financial benefits- The amount which is provided to the nominees or the beneficiaries can be utilized for paying out the major unavoidable expenses such as paying rent, utility payments, Mortgage repayments, child higher education expenses, and others.

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What are the different types of term insurance in the UAE?

In the UAE, there are different types of term insurance available. Depending upon the requirements of the insurer the benefits and the types of insurance are available. 

Convertible term insurance- With a limited number of years this policy is offered to the policyholder and after a certain period it can be converted into whole life insurance. Any kind of medical test is not required to be submitted by the policyholder during the conversion time. This is the main advantage of this term insurance. 

Increasing term insurance- With the increase in time the policyholder can increase the death benefit under this policy. During the entire term period, the premium amount may or may not be the same. 

Decreasing term insurance- Up to a fixed percentage the sum assured amount decreases every year. The payment of premium will remain the same throughout the tenure. It is quite opposite to the increasing term insurance. The premiums are lesser compared to the traditional plan. 

Level insurance plan- A fixed amount is paid for the claim and this can be claimed in the starting stages of the policy or at the end of the policy tenure. However, the insurance payments will be the same and there will be one-time payment only. 

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Advantages of Term Insurance

The following are the advantages of term insurance.

Simple and Easy- Term Insurance is simple and easy to understand. Compared to whole life insurance and market linked policy term life insurance is simple. It can be easily understood by a common man. It is the most simple form of insurance which can be understood by how term insurance operates. 

Affordability rate- The term insurance comes at an affordable price. Cost effective plans can be availed at the competitive rate of premium. 

Flexible in nature- Term insurance is flexible in nature. For regular premium payments, this plan can be purchased. If the premiums are not paid then the insurance ceases. 

Helpful to family members- The term policy offers benefits to the family members when the insured expires. The policy is helpful to the family members. 

What is not covered under Term Insurance?

The term insurance does not provide coverage in the following circumstances. 

  • If the policyholder commits suicide or death occurred due to suicide. 
  • If the death has occurred due to HIV AIDS.
  • The accident occurred due to Drunken drive 
  • The death occurred while giving birth to a child
  • The death occurred due to any prohibited acts

For more detailed information on the list of non-coverage of term insurance contact the policy provider. 

Who is eligible to buy term insurance?

The criteria for eligibility would depend on the insurer. However, the minimum age to enter into term insurance is eighteen years and this would depend on the insurer. The maximum age is sixty-five years to seventy years and this would again depend on the insurer requirements. 

Documentation requirements

The basic documents that are required to buy the insurance are Emirates ID, Residence Visa, and Photos. Additional documents may also be required as per the requirements of the insurance company. 

Settlement of Claim

For a hassle-free settlement, the nominees should follow the right steps
Immediate Intimation– When the event occurs immediately inform the insurance company and register the occurrence of the event. The insurance company registers your claim immediately
Assessment process- The insurance company assesses the event, collects the details along with the documentation process. 
Settlement of claim- The final step is the settlement of the claim. After the detailed verification, the insurance company settles the payment. The claim amount is transferred to the beneficiary account.

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Vinay Kumar Goguru is a finance professional with more than 8 years of diverse experience as a researcher, instructor and Industry work experience with both public and private entities. Prior to MyMoneySouq, he spent 6 years in Berkadia, It's a commercial mortgage banking company. He has a "Doctoral Degree in Commerce" and two master's degrees with a specialization in Finance, one as Master of Commerce and other as Master of Business Administration. He has written several articles on personal finance, published by different International journals. He loves traveling, reading and writing is his passion. He has a dream of writing a book on his favorite finance topics.

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