Dubai: A lot of things could happen if you die or are diagnosed with a life-threatening disease in the UAE, and one of them is that your wife, husband or children could be out of pocket.

According to a study, nearly five in ten residents in the country risk leaving their loved ones in a similar situation, because they don’t have adequate insurance coverage.

In a research commissioned by Friends Provident International (FPI), 48 per cent of respondents admitted that they do not have a life or a critical illness cover. Many of them have not signed up for a policy because they either deem the premiums to be high or they are unfamiliar with the concept.

Unlike most people’s current medical insurance, life or critical illness policies guarantee that the surviving family members will have sufficient money to dip into in the event that the breadwinner dies or get critically ill.

A life policy is highly recommended for professionals who have children, wife or husband who rely solely on them for money, while a critical illness plan works best for those whose health insurance does not cover chronic diseases like cancer that require long-term treatment or expensive medical procedures.

 “It is important for the bread winner of the house to have life insurance so his dependents are taken care of in case of his untimely demise. Life insurance is recommended even for mothers though they may not be working,” Preeti Bhambri, founder of personal finance website Bhambri told Gulf News.

“A pure life or critical illness policy does not involve hefty premiums so in that sense it is different from retirement/ college education policies. If you understand investment products, you would certainly be better off keeping insurance and investments separate.”

Empoyee package

Marcus Gent, managing director for Middle East and Africa at FPI, noted that most people who have moved to the UAE for work only have life and/or critical illness cover as part of their employee benefits package. This means that they could be left unprotected if they move to another company.

“It is easy to think that you are indestructible when you are young. However, protection should form a cornerstone of any robust financial planning, especially for an expat professional worker,” Gent said.

“I would therefore encourage all expats to speak with a financial adviser with a view of arranging their own-life and critical illness cover, and to ensure they have comprehensive personal protection regardless of their employee benefits.”

Why you should get one

Andrew Prince, financial planner at DeVere Acuma, can’t stress enough why everyone should have the insurance in place.

“My father died the day after his 50th birthday leaving a mother and four children. My best friend died aged 42, leaving a wife and two boys, while in our Dubai office, we have lost two of our similarly aged ‘family’ in the past couple of years,” noted Prince.

“I’m sure you also know someone in your family or circle of friends that have experienced life-changing situations and yet how many have any or adequate insurance for such an event? It’s easy to be wise afterwards, but how would you and your family cope with the sudden loss of a breadwinner?”

Prince said a life insurance policy doesn't cost a lot of money. A young family man, for example, can insure his life for $200,000 under a 25-year term by paying a monthly premium of $30. In 25 years, the total outlay would be $9,000.

"Alternatively, it would take over $400 per month and the whole 25 years to save a similar amount at 5 per cent annual return," noted Prince.

That doesn't mean investing in a life insurance plan is enough. In fact, one would do well to maintain an insurance policy and a savings scheme at the same time.

"It would take a very long time to save up an adequate amount in a bank account and would run the life assurance and savings strategies side by side. As a family man, you are running a huge risk by not insuring your ability to provide for the family [because] one in four [people] will die or suffer a life-threatening illness before reaching 65."

"In my professional opinion, I would arrange the life assurance to run alongside the savings plan because you are either going to live too long or not at all. With basic life assurance, as with your car and home insurance, there is nothing back at the end of the term."