Whole of Life Insurance, as the name suggests, it provides life cover for the whole life of the insured.

In addition to life cover it also includes investment, which accumulates a cash value over the life of the plan. This cash value is one of the important elements of whole life insurance.

In UAE most whole of life polices are unit linked and they also offer the most important critical illness benefit for the whole of life of the insured.

Such policies were designed to address the short comings of a term insurance. The biggest challenge with term life insurance is that it offers cover for a fixed term, usually upto 70 years.

If the insured dies after the term ends, the beneficiary does not receive the death benefit nor does he get back the premiums paid  because the insured did not die during the term.

All the premiums paid into a term insurance plan are an expense and the money has no chance to comeback.

Term Insurance can be compared to a rented house, where you can live as long as you pay rent, if you stop paying rent, you can no longer can live in the house. When you leave the house you do not get back the rent you have paid.

Whole of life plans can be compared to a own house on a mortgage, where you pay the mortgage for a certain period, once the mortgage is paid the property is yours. When you sell the property you can expect to get more than what you have paid for it, similarly a whole of life plan pays out a cash surrender value, when you feel that you no longer need cover and surrender the plan.

Features of Whole of Life Insurance

Buying a whole of life insurance policy is a good idea if one or more of the following features are important to you;

1. Life Long Critical Illness Cover : Most whole of life insurance plans in UAE, cover critical illness till age 95 – 100. If you are concerned about depleting your retirement savings in the event of critical illness after age 70, then a whole of life plan is ideal for you.

Whole of Life Insurance

If you are concerned about depleting your retirement savings in the event of critical illness after age 70, then a whole of life plan is ideal for you.

2. Leaving a legacy : A Whole of life Insurance is a ideal tool to build a large legacy at an affordable cost.

3. High Price but Low cost : For people who are young, especially less than 40 years of age, buying a whole of life plan with critical illness benefit is a very good idea.

Let us see the following example, where John is 30 years old, Non Smoking Male.

Type of cover Life Cover or Earlier Critical Illness Cover Term / Premium Term Monthly Premium Total Premium Cash Surrender value after age 65 Cash Surrender Value at age 75 Cash surrender value at age 85
Term Insurance $500,000 35 Years $208.74 $87,670.80 No Cash Surrender Value and No cover after 35 years
Whole of Life $500,000 15 Years $552 $99,360 $232,008 $305,281 $373,289

In this example it is evident that although Whole of Life Insurance seems costly because of higher monthly premiums, it is cheaper than term insurance if a long term view and cash surrender value is taken in to account.

Flexibility : Most Whole of Life Insurance plans in UAE are very flexible, you can increase or decrease the premiums and cover after 2 years, you can also add or remove additional riders like permanent total disability benefit, Accidental death benefit, dismemberment benefit, Family income benefit at any point of time.

You can also avail a premium holiday facility after 3 -4 years of premium payment, for up to 2 years. You can avail this facility if you are unable to pay premiums for a certain period, while continuing cover and other benefits during the premium holiday facility.

Cash Surrender Value : As discussed earlier, the Whole of Life policy has an investment component, and hence a cash surrender value. You can choose to surrender your plan, in lieu of cash if you decide that you no longer want the life and critical illness cover.

If you surrender your plan early, then the surrender value would be low, and if you wait till you are more than 70 or 80 your cash surrender value will be significantly high in comparison to the premiums you would have paid into the plan.

Why Buy Whole of Life Insurance?

  1. To provide funds to pay for medical expenses due to critical illness during retirement.
  2. To provide income for dependent family members in the event of death of the bread winner until they become self-supporting and to leave a legacy for children and grand children
  3. To provide large amounts of cash at death of bread winner; for children’s college expenses, marriage expenses or other capital needs
  4. To provide cash for repatriation of expat family and for paying inheritance taxes in their home country if applicable.
  5. For protecting business liabilities of owners and partners
  6. To ensure business continuity in the event of death or critical illness to one of the partners.
  7. To indemnify a business for the loss of a key employee
  8. To provide for charity on death of the insured

Summary

Whole of Insurance is ideal for long term protection needs, although the monthly premiums are usually higher than term insurance, it costs less in the longer term.

Zurich Futura, Metlife Future Protect and Hyat Plus from Salama are some of good whole of life plans available in UAE.

To know more about Whole of life plans or to help you choose the most suitable plan with complementing riders call me on +97150-2285405 or click here to write to me.

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