Life Insurance in the UAE

uae life insurance market

In the current economic climate, it’s no wonder that many people living in the UAE and other points around the world are thinking about life insurance if they don’t already have a policy. A recent Zurich International Life Limited survey of 1,000 UAE residents found that 46 per cent of respondents said life insurance policies were increasingly important to them. It was the second-most crucial financial product behind savings products. So, if you find yourself among those UAE residents or soon-to-be UAE residents asking about the UAE life insurance market, we have what you need.

 

How does life insurance work in the UAE?

The UAE Life Insurance Market

There are several policies you can contract, using both Western and Islamic finance principles. First, there are whole life insurance policies, which are policies that your beneficiaries will receive when you die. Term life insurance policies work like whole life insurance policies, but your beneficiaries only get the money if you die within the terms of your policy. Endowment insurance policies are those where you get your lump sum reimbursed if your policy matures before your death; if you die before the policy matures, your beneficiaries will receive the amount. Finally, there are combo-policies that combine coverage and money that are for both whole life and term policies; they’re the most in-demand across the industry. 

Then there’s takaful. If you’re unfamiliar with takaful, what you need to know is that it is a type of insurance policy in Islamic finance where members pool in money to guarantee the members against damages or losses. 

 

UAE Life Insurance Regulations

Before we go into UAE life insurance regulations, we must go over a crucial piece of UAE life insurance news. It concerns the regulatory framework from the life insurance market in the UAE that you need to have in mind. On 7 July 2020, Sheikh Mohammed bin Rashid Al Maktoum announced that the Insurance Authority would merge with the Securities and Commodities Authority, the regulatory agency on the mainland in the UAE in charge of regulating the capital markets and securities industry. Sheikh Mohammed cited the need to more adeptly react to the current circumstances as the reason for creating a more nimble bureaucratic structure that would lead to an agile government that can act swiftly. 


Many industry experts welcome this consolidation because two critical channels of the life insurance system, the insurance brokers and the investment advisors, were under the purview of two separate regulatory authorities. The insurance brokers under the auspices of the Insurance Authority while the investment advisers were generally following SCA guidelines. The hope is that this change will make it easier to enforce improvements to the system and spark new regulations from working together.

 

In November 2019, the UAE Insurance Authority had released a new set of life insurance regulations as well as for family takaful. The new rules give us critical insights into the terms of contracting a life insurance policy in the UAE. One of the most noteworthy changes was the question of commission payments. Many consumers in the UAE would go for upfront lump-sum or long-term life insurance policies because of the promise of attractive returns. However, the commission payments would eat up any of the foreseen gains that many would not be able to back out of the policy before paying it out in full. With that in mind, insurance providers must spread commissions out across the terms of the policy, so if your policy covers you for 20 years, your commission payment will spread out across the duration of the plan. These commission rules also apply to every type of policy, allowing for uniformity across the industry.


Another critical development in this regard is the capping of indemnity commission payments. They will be equal to either 50 per cent of the total commissions payable or 50 per cent of the annual premium. All remaining commissions, as we mentioned, will spread out evenly across the term; however, if the policy in question is a premium product of a duration of at least 20 years, there can be some fluctuations that the actuary can propose.

 

Finally, the last noteworthy of the developments was the implementation of a free look period of at least 30 calendar days. Since a life insurance policyholder can cancel it without penalty during this initial free look period, it allows for a standard set of protections across the industry. 

 

If you’re moving to the UAE as a resident, the only insurance requirement for your visa is for health insurance (residency visas cannot be issued without health insurance). At the same time, it’s recommended to have a life insurance policy. The answer to the question “is life insurance required to get a business bank account in the UAE?” is no. 

 

How much is life insurance in the UAE?

The price range for life insurance premiums varies in the UAE and can be as low as 40 AED to at least 100,000 AED. What is a reasonable amount? According to iAE Insure in the UAE Managing Director Ian Featherstone in an interview with Gulf News, a fair amount to pay for a policy from a well-qualified advisor would be 550 AED, or £118.72. As most people in the UAE are ex-pats or geographically mobile, many look for policies that they can take with them since they will often retire in other countries or eventually go back to their home countries.

 

Is life insurance taxable?

One of the most significant boons of living in the UAE is the tax-free income associated with it. While the UAE announced a five per cent value-added tax or VAT across a broad swathe of products, life insurance policies are exempt from this tax. The UAE Federal Tax Authority confirmed in official guidance released in September 2018 that the exemption will apply to life insurance premiums. 

 

How can you contract a life insurance policy in the UAE?

If you’re interested in figuring out what’s the best life insurance policy to meet your needs as either an ex-pat, entrepreneur or HNWI individual, our team at Europe Emirates Group can offer you the best guidance to give you a policy as mobile as you are. Ready to get started? Contact us today.

 

Written by
Mei Wang

Mei Wang

Business Advisor, Europe Emirates Group

 

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