Finance World Magazine| Edition: January 2024

We cannot control what lies ahead,
but we can certainly make informed
decisions to safeguard
ourselves from the financial challenges
that may arise in life. Using insurance is
one such way to maintain stability during
life’s unexpected incidents. With advances
in almost every aspect, insurance has also
progressed. However, there are certain
fundamental insurance types that every
individual who aims to make informed
financial decisions should know. Four of
these are discussed as follows:
Life insurance
Life insurance stands as a cornerstone
of comprehensive financial planning. It
offers two fundamental types: whole
life and term life, each serving distinct
purposes.
Whole life insurance acts as both an
insurance policy and an income tool.
It features a death benefit and a cash
value component. As the cash value
accumulates, it can be accessed through
loans or withdrawals, and policyholders
can terminate the policy by obtaining its
cash value.
On the other hand, term life insurance
provides coverage for a specified period,
typically 10, 20, or 30 years, with stable
premiums throughout. Often more affordable,
this policy type can be tailored
to cover specific periods, such as the
years of a mortgage or a child’s college
education.
Life insurance becomes crucial, especially
if your family relies on your
income. Experts often recommend a
policy payout equivalent to 10 times
your yearly income to provide adequate
financial support.
When determining the necessary coverage,
consider various expenses. Start
with funeral costs and then calculate your
family’s daily living expenses, including
mortgage payments, outstanding loans,
credit card debt, taxes, childcare, and
future educational expenses.
Health Insurance
Unlike life insurance, health insurance
is mandatory for the residents of the UAE.
It allows premium healthcare services
without disturbing your budget.
The UAE government mandates that
all residents, including expatriates
and nationals, have health insurance
coverage. This initiative, introduced in
phases starting in 2014, aims to guarantee
access to essential healthcare services
while lessening the financial burden on
individuals seeking medical treatment.
Health insurance policies in the UAE
typically offer comprehensive coverage
for various medical services, including
hospitalisation, outpatient treatments,
maternity care, emergency services, and
prescription medications. The coverage
often extends to pre-existing conditions
and chronic illnesses, depending on the
policy terms and conditions.
Many employers in the UAE provide
health insurance coverage as part
of their employment benefits. These
employer-sponsored plans often cover
employees and their dependents, offering
varying levels of coverage based on the
employer’s chosen insurance package.
Apart from employer-sponsored
plans, individuals can purchase private
health insurance policies from insurance
providers operating in the UAE. These
policies cater to specific needs, offering
flexibility in coverage limits, additional
benefits, and tailored options for individuals
and families.
The UAE government has established
regulatory bodies, such as the Dubai
Health Authority (DHA) and the Health
Authority Abu Dhabi (HAAD), to oversee
the implementation and regulation of
health insurance across the Emirates.
Long-Term Disability Coverage
In the UAE, long-term disability coverage
typically falls under the broader category
of critical illness or permanent disability
insurance. These plans are designed to
provide financial support if an individual
becomes permanently disabled due
to an illness or injury, preventing them
from working for an extended period
or indefinitely.
This type of insurance often covers a
range of critical illnesses or disabilities
that render an individual unable to work
for an extended period. It provides a
lump sum payment upon diagnosis of
a covered critical illness or disability,
offering financial support to cover medical
expenses and replace lost income.
Some insurance policies in the UAE
include provisions for permanent disability,
where individuals receive financial compensation
if they experience permanent
disability due to an accident or illness,
resulting in an inability to work.
Employers in the UAE may offer group
insurance plans that include disability
coverage as part of their employee benefits
package. These plans can provide some
level of long-term disability coverage to
employees.
When seeking long-term disability
coverage in the UAE, individuals should
carefully review the terms and conditions
of the insurance policies available. It’s
advisable to consider factors such as
coverage limits, waiting periods, exclusions,
and the extent of disability or
critical illnesses covered by the policy
before making a decision.
Auto Insurance
Auto insurance in the UAE is a vital
component of vehicle ownership,
providing financial protection against
various risks and liabilities associated
with driving. It is mandatory by law for
all vehicles operating in the country to
have at least basic insurance coverage.
Understanding auto insurance in the UAE
involves familiarising yourself with its
types, coverage options, and regulatory
requirements.
There are different types of auto insurance,
including third-party liability
insurance. It is the minimum mandatory
insurance required by law in the UAE. It
covers damages caused by the insured
vehicle to third parties, including bodily
injury or property damage. However, it
does not cover damages to the insured
vehicle itself.
Another type is comprehensive insurance
which offers broader coverage,
encompassing both third-party liabilities
and damages to the insured vehicle. It
covers theft, accidents, natural disasters,
vandalism, and more, providing extensive
protection for the insured vehicle and
its occupants.
Consulting with insurance providers
or financial advisors can also help in
understanding the available options and
selecting a plan that best suits individual
needs and circumstances.
In the UAE, auto insurance is regulated
by the Insurance Authority. It is
mandatory for all vehicles to have at
least third-party liability insurance to
legally operate on the roads. Failure to
comply with this requirement can result
in fines, vehicle impoundment, or even
legal action.
January 2024 www.thefinanceworld.com 9