Five tips: Picking the right life insurance policy

Five tips: Picking the right life insurance policy
30 May 2013

As Forest Gump famously said; ‘Life is like a box of chocolates. You never know what you’re going to get.’

The fact is, anyone’s life can turn on a sixpence, be it a sudden death in the family or, (as happened last week in Oklahoma City) a terrible natural disaster. While we can’t control the future, or make up for loss and tragedy, we can at least make sure that our loved ones are provided for should the worst happen. We spoke to Rupert Connor, Partner of Abacus Financial Consultants about getting your first life insurance policy off the ground.

Q: Is there a percentage on the numbers of people in the region who have life insurance – and is it really necessary?

A: I am unsure the percentage of people who have life cover in the UAE but from my day to day dealings I imagine it is pretty low. Some may have cover, whether it provides enough on delivery, or if it’s the right policy is another question. Life insurance is very important. This is actually the starting point for proper financial planning, because death is inevitable and as such, is an uncontrollable event.

Q: How do you evaluate which policy is best for you?

A: You need to ask three, vital questions, namely: How much income will your family need if you die? How will inflation affect this income? And how will you preserve your estate for your family when you die? I’d recommend speaking to a financial adviser in order to cover of these points. 

Q: What should you look for when examining policies so you don't get ripped off (clauses/smallprint that could make the policy null and void)?

A: If you stick to global companies then there is no chance of being ripped off. The insurance companies expect you to tell the truth and they in turn rate the individuals risk based or current mortality and morbidity rates. Living in the Middle East means that we are all geographically higher risk, so premiums tend to be more expensive here.

Q: Is getting yourself properly insured very expensive?

A: It can be if you have health problems, but generally, term life assurance is a very inexpensive way of insuring yourself.

Q: What would your advice be to someone looking into it?

A: Take the time to sit down with your adviser and work out exactly what type of cover is needed. It might not be as costly as you think.

Do you have any questions or comments on the issue of life insurance? Tell us what you think.

Comments

  • nima
    nima
    2013-06-03T09:42:11

    A friend reacted to her husband's sudden death by taking out life insurance (he didn't have any) for the sake of their children. She chose a policy that's linked to a savings plan of sorts - if she doesn't die by age X, she gets a pot of money. My feeling, without knowing the exact detail of her policy, is that this sort of arrangement might tug the emotional heartstrings: a pot of money is hers if she makes it to an age when her children are 'independent', but isn't this simply a gimic? It's not the best way to save, nor is the policy the most cost effective. I'd go for a basic one where you pay each month &can cancel at whatever point (after initial period) penalty free.. what say you?

  • rupertjconnor
    rupertjconnor
    2013-06-03T13:03:12

    Hi Nima, the policy you refer to is called a 'whole of life' plan and you are correct in saying that it has an investment element to it - some of the monthly premium is used to cover the risk and the other is invested. Sometimes British people use these plans to cover any inheritance tax liability rather than leave their children with a big bill to pay the tax man. Others simply like receiving some sort of return after paying years of monthly premiums. I personally prefer to keep my insurance and investments seperate as there are much better ways to invest money thatn through a life policy. Term life assurance is the cheapest way of obtaining cover and like you say, once you stop paying you are no longer covered. 

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