The five (5) types of insurance in the UAE

In many ways, 2020 has reminded us that there are few certainties in life. And as we have seen, those with paid-up insurance policies in place have generally fared better than those without – whether in the UAE or elsewhere.

Insurance offers a cushion of financial support by providing safety and security against specific events. Regardless of one’s current status, insurance can serve as a safety net when things go wrong. This article looks at the concept of insurance and explains the different types of insurance in the UAE, as well as the benefits of each type and who it is suitable for.

What is insurance?

At its most basic, insurance safeguards you from the risk of loss, damage, theft, or other uncertainties in the future by providing financial protection or reimbursement in return for a monthly or yearly fee. In effect, you transfer the risk of financial losses – or future outgoings – to an insurance company (or insurer) for a smaller fee. Health insurance can pay for sudden hospitalization, for example, while auto insurance can reimburse you for the cost of an accident.

Insurance companies are able to pay out large sums of money because they pool many clients’ risks in order to make payments affordable.

The UAE has a well-developed insurance sector with a mix of local and international providers.

What is Sharia-compliant insurance in the UAE?

Several insurance providers also offer sharia-compliant insurance policies in the UAE. Known as Takaful, these are based around the principles of sharia or Islamic law – where individuals are responsible for protecting and co-operating with each other.

Unlike with a conventional insurance scheme, participants in takaful insurance plan donate to a shared Takaful fund, providing protection for each member against combined risks, while sharing the surplus equally. The company manages and operates the Takaful fund on their behalf with no prior expectations of fixed returns.

Types of insurance in the UAE

There are several different types of insurance in the UAE. Each product is designed to meet specific needs. The most common types of insurance in the UAE are enumerated below. Each is available in both conventional and Takaful forms.

Health insurance

One of the two types of compulsory insurance in the UAE, health insurance is mandatory for residents of Dubai and Abu Dhabi. Health insurance typically covers the whole or part of the risk for medical costs such as consultations, surgical expenses, lab tests, prescription drugs, and sometimes, dental costs.

Emiratis have accesses to specific government insurance programs. Expats in the UAE rely on corporate schemes agreed with their employers, with the extent of coverage often determined in line with employees’ salary and designation.

Who should have health insurance: The unpredictable nature of medical emergencies makes health insurance advisable for people of all ages and from all walks of life. Anyone who isn’t covered by their employer can take out a private medical insurance scheme instead; there are several private operators in the UAE.

Auto insurance

Anyone who drives a car or other vehicle in the UAE must insure it to at least a third-party liability level in line with local law. Such plans offer coverage for against claims made by others for damages to themselves or their property. On the other hand, fully comprehensive auto insurance offers a higher level of protection and covers all incidents – including when you are at fault, as well as if your own car is damaged or stolen. Further additions may include specified agency coverage, emergency medical help, road assistance coverage and off-road incidents.

Who should have auto insurance: In the UAE, anyone who drives a car or other vehicle is legally obliged to take out an auto insurance policy.

Life insurance

A hedge against the ultimate loss, life insurance policies provide for a lump-sum payment, known as a death benefit, to beneficiaries upon the insured’s death. Some life insurance policies available in the UAE also guard against disability or critical illnesses, as well as providing optional extras such as hospitalization and family income benefits. Some expats may be offered life insurance plans as part of their benefits package. Premiums depend on several different factors, including the age at which you take out the policy.

Who should have life insurance: Anyone with a dependent family should take out a life insurance policy. In many cases, the additional features allow you to provide for yourself in the event of retirement or having to give up work due to a disability.

Property insurance

A few affordable property insurance plans are available in the UAE to cover against damages caused by fire, floods earthquakes, vandalism, or theft. While building insurance covers structural repairs (separate kinds of plans are available for villas and apartments), home contents insurance protects your personal belongings against damage and theft.

Who should have property insurance: Property owners should consider taking out building insurance. Anyone with a mortgage will be expected to do so by the finance provider. Home contents insurance, on the other hand, provides an extra bit of cash when it is sorely needed.

Travel insurance

As a travel hub with superlative international connectivity, the UAE makes for a great base to explore the world. Travel insurance protects against unforeseen expenses on such trips, providing coverage against overseas medical expenses, canceled or missed flights, lost baggage, emergency accommodation costs abroad and third-party liability costs.

Who should have travel insurance: Anyone making an international trip should consider taking out travel insurance to avoid out-of-pocket expenses in a strange and often unfamiliar country. Additionally, some countries, require tourists to have travel insurance. Most insurers now also cover COVID-19-related expenses while travelling.

While insurance depends on your personal situation, it is worth remembering that a strong insurance policy offers security when things go wrong.

Things to check when buying an insurance policy

Most UAE residents take a combination of different types of insurance policies. While health and auto insurance are mandatory in the UAE, many residents seek to assure their family’s wellbeing with life insurance. Travel and property insurance, on the other hand, depend on your unique needs.

Keep the following questions in mind when considering any kind of insurance policy in the UAE:

• What needs to be covered and what additional extras should you include?
• What should be the extent of coverage?
• What different aspects are covered?
• How does this coverage benefit you?
• How long do you need to pay a premium for?
• What happens if you miss a premium payment?
• What are the policy’s exclusions?
• What is the waiting period for payout?
• Does the policy come with a no-claim bonus?
• Does a claim affect your premium payment?
• Who would you like to nominate as a beneficiary?

Not all the points above will apply to each of the various types of insurance, but these should help you get started.

Consult an insurance advisor

Before taking out insurance of any kind, take a moment to seek expert advice. Insurance advisors are specialists in finding facts, understanding your insurance needs and in recommending a product that yours your needs.

Reach out to our advisor today to find out how insurance can serve your needs.

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