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Is it really worth the risk of not investing in life and critical illness insurance?

June 19, 2018

Have you always avoided thinking about life and critical illness insurance? If so, you’re not alone. But by not taking the time to put the right protection in place, you could be putting your own future and your loved ones at risk.

It’s true it’s not the sunniest of topics, but studies have shown that only a fraction of people living in the UAE have life and critical illness cover, so it’s an important one.

Emiratis have the back-up of generous state benefits, including monthly payments for people who are widowed or left medically unfit to work. However, the expats who make up the majority of the population don’t have the luxury of this safety net, unless it’s part of their employment benefits package.  Even when there are some company benefits, these are often inadequate and less than might be expected.

If you have a family or dependents that rely on you, it’s important to take the time to consider your options to make sure they will be protected financially if something happens to you.

If you have a family or dependents that rely on you, it’s important to take the time to consider your options to make sure they will be protected financially if something happens to you.

Why you should consider buying life and critical illness cover

The key purpose of both life and critical illness insurance is to provide protection against loss of income. Life insurance is designed to alleviate the financial burden of your death on loved ones, while critical illness cover will help you and your family cope if you become seriously ill with a condition specified in the policy.

The conditions covered typically include cancer, heart disease, heart attacks, strokes and others such as kidney failure, Parkinson’s disease, paralysis and multiple sclerosis. Some less serious conditions may also be covered, with a smaller payout (more on that later).

Therefore if you have a spouse and children or other dependents, life insurance would provide a financial cushion for them if you die, while critical illness cover would ease the financial burden of serious illness.

If you’re single, life insurance might not be relevant. However you should still consider critical illness cover. The lump sum would help you cope with the sudden changes to your life that serious illness can bring, such as the need to make adjustments to your home or even relocate. It would also help you meet your living expenses if you were unable to work.

The harsh reality of your health risks

Of course, the risk of developing serious health conditions increases with age. The sobering reality is, though, that the vast majority of people in the UAE who claim on their critical illness insurance or die while covered by life insurance are under the age of 60. Many of them have a partner and children who rely on them and their income.

Cancer is the biggest reason for claims on both classes of insurance, followed by cardiovascular diseases. However when we break the trends down by gender, it’s women in particular who are affected by cancer, while cardiovascular diseases are the predominant cause of serious illness and mortality for men.

Cancer is the biggest reason for claims on both classes of insurance, followed by cardiovascular diseases.

Looking at the overall health statistics for the UAE from the World Health Organization (WHO), 65% of deaths are caused by non-communicable diseases (NCDs), including cardiovascular diseases, cancers, chronic respiratory diseases and diabetes. Around 23% of deaths are caused by injuries and 12% are due to other causes.

UAE residents over 30 face a 19% risk of premature death due to NCDs. Risk factors that can increase your chances of this include smoking, drinking alcohol, raised blood pressure and obesity. You can improve your health and lower your risk level by tackling bad habits and focusing on healthy living, including being more active. This might also help you secure more favourable premiums for life and critical illness coverage.

However you can never completely remove the risk. We’ve all heard tragic stories of apparently fit, healthy people collapsing and dying from a heart attack or stroke, losing their lives to cancer or becoming permanently disabled. Life and critical illness cover exist to soften the blow if the worst does happen.

How do life and critical illness insurance work? 

With both types of insurance, you make regular ongoing premium payments, which will be set by the provider’s underwriters based on your level of risk. You can opt to buy critical illness cover as part of a package with life insurance, or as a standalone product.

With life insurance policies, it is usually possible for the named beneficiaries to arrange a payment plan that suits them, when the time comes. The options will generally include a single lump sum payment or some form of regular payments.

With critical illness cover, once a claim has been approved, you will receive a lump sum pay out to help you meet your living costs and extra expenses as you deal with your health condition.

So what do you need to do to get covered?

There are many products out there, and working out the best ones to suit your needs can be difficult without expert support. An insurance advisor or broker will be able to help you find the best package for you and your situation at the most affordable price.

An insurance advisor or broker will be able to help you find the best package for you and your situation at the most affordable price.

Once they have found out key information from you, your advisor will sift through the products available and help you settle on the best mix.

Here are a few points to bear in mind:

  • When it comes to critical illness cover, you should aim to be covered for the widest possible range of conditions at a price you can afford.
  • You will often find that you can get a better deal if you take out critical illness insurance as part of a package with life insurance, rather than as a freestanding product. However, note that you will usually only be able to claim once. So if you receive a payout when you’re diagnosed with a serious illness, the policy may effectively have come to an end.
  • If you’re married, you might want to consider taking out a joint life insurance policy, which will pay out when the first partner dies.
  • Make sure to be honest about your own health (habits such as smoking and alcohol consumption, plus family medical history) otherwise your insurance could be invalidated.
  • You may need to have a medical, so your chosen provider can make an accurate assessment of your risk of developing various conditions.
  • You will need to decide on the length of term you want your life insurance plan to cover. You can opt for whole of life cover, but your premiums will generally be lower if you agree a set end date. But don’t delay by thinking you will save if you take out a policy later in life. In fact, the younger you are when you start, the lower your premiums will be.  Some providers offer incentives to take on whole of life cover, such as free critical illness cover for children, so you will need to weigh up the options carefully.
  • It’s important not to underestimate the level of coverage you need. Think about all the expenses you currently have to pay out each month. Then imagine how much your outgoings might increase if you were suddenly incapacitated, or how your partner would cope without your income.

Being prepared

Taking out a life insurance policy is a long-term commitment, and you may be charged a fee to terminate a plan early. So while it can provide a real lifeline for your loved ones in the event of your death, it’s not something to enter into lightly. In addition, there are many options, so it’s important to seek expert independent advice.

While this is, admittedly, not a very cheery topic, having the right package of insurance in place will help to protect your future and that of your family, and bring you peace of mind.

If you’re interested in finding out more on the private wealth services Lifecare provides, get in touch with us today via the following form.

About the author: Chris Kendrick, UAE Commercial Director

Chris Kendrick is a financial services professional with 17 years of experience across multiple disciplines including private banking, SME banking, retail banking and offshore financial planning, He has worked for some of the world’s leading financial institutions in the UK and UAE, including Standard Chartered Bank, HSBC, and NatWest. Chris started with Lifecare International as the Head of Private Clients transforming the business to a client centric fee based adversary. Chris is now the UAE Commercial Director for
Lifecare looking after all Wealth, Medical and Insurance businesses.