2 Types Of Coverage You Need: Life And Health Insurance

Life comes with its share of risks, and insurance is a safety net. It shields you from financial losses when things go wrong.

Health insurance in the UAE is a prime example — it’s mandatory for a reason. Health insurance ensures you have the monetary resources and financial capacity to deal with unexpected medical expenses so you won’t have to dip into your savings to pay for surgery, hospitalisation, medication, and the medical procedures you may have to undergo.

Having the right and adequate insurance coverage means peace of mind. Whatever happens – accidents, sickness, the death of a breadwinner – you know you have a buffer and won’t be left picking up the pieces on your own.

There are many types of insurance, including income protection insurance, car insurance, loan repayment insurance, etc. However, there are two you absolutely need: life insurance and health insurance.

Life Insurance

Life insurance is a legally binding agreement or contract between an insurance company and the policy owner — typically the insured, unless the policy is owned by a company or a business entity that provides life insurance as an employee perk. The contract states that the insurance company will pay the policy’s beneficiary or beneficiaries a certain amount (the death benefit) if the insured passes while the policy is active.

Life insurance is unique. Most insurance policies protect the insured, but life insurance protects insurance beneficiaries. Specifically, it secures the lifestyle of the people left behind in case of the insured’s untimely demise.

Therefore, life insurance is a policy you acquire to secure your loved ones’ well-being when you pass away. It will ensure your family doesn’t struggle financially in your absence.

Life insurance benefits can cover funeral expenses. They can contribute toward estate taxes, pay for amortisation and debts, cover bills and groceries, and temporarily offset the household income lost if the insured is a breadwinner.

Term Versus Whole Life Insurance

There are two common types of life insurance: term life and whole life.

Term life insurance covers you for a set period, such as one, two, five, 10, 20, or 30 years. Your beneficiaries will receive a lump-sum payout if you pass away during that period.

Meanwhile, whole life insurance pays a guaranteed death benefit (which may be enhanced by a variable death benefit) upon the insured’s death. It provides lifetime coverage as long as you continue paying your insurance premiums; such premiums are fixed or level for life. The policy has a cash value component that grows over time, and you can borrow or withdraw from this cash value. Note, however, that doing that reduces your death benefits.

Between term and whole life insurance, the former offers greater value for money because the premiums are lower, and the death benefits tend to be higher. However, the latter allows you to save money in a fund that can grow, earn interest and dividends, and increase the total death benefit you will leave behind. You may also withdraw your insurance policy’s cash value as needed.

Add-Ons

Some life insurance policies offer add-ons, like critical illness coverage, which pays out if you’re diagnosed with a serious health condition. This can provide crucial financial support for medical bills and lost income. Some life insurance also pays additional benefits in case of accidental death.

Health Insurance

Health insurance pays for medical treatment and thus cushions you from the financial strain of unexpected illnesses or accidents.It ensures access to high-quality healthcare; since the insurer pays for the cost of treatment, you can obtain the best medical care without worrying about the high costs associated with your doctor visits, hospital stays, surgeries, medical procedures, and medications.

The breadth and depth of coverage depends on your policy. More comprehensive coverage typically means higher insurance premiums. Health insurance coverage may include:

• Outpatient doctor consultations, diagnostic procedures, surgery, medication
• Hospital room costs and inpatient doctor visits, diagnostic procedures, surgery, medication
• Optical care (consultation and treatment)
• Dental care (consultation and treatment)
• Emergency treatment
• Overseas medical treatment
• Medical repatriation
• Preventive care
• Specialist consultations

Individual and Employer-Sponsored

Health insurance can be individual or employer-sponsored. Employer-sponsored plans are part of employee benefits packages. Since they are standardised packages, they may not cover everything. That said, the higher your position in a company, the more comprehensive your health insurance is likely to be.

You procure individual health plans yourself, typically to supplement employer-provided medical coverage. A well-chosen health insurance plan can save you significant out-of-pocket expenses and ensure you get the care you need when it matters most.

No-Cash Outlay

Health insurance plans may come with access to a network of healthcare providers. Insurers may have partnerships with certain hospitals and clinics, so check if your preferred doctors or hospitals are part of an insurance company’s network of providers if you want cashless treatment arrangements.

Coverage Limits and Exclusions

Health insurance plans vary in coverage limits and exclusions. They usually exclude pre-existing conditions. Those that cover them typically have pre-existing condition benefit limits. Health plans may also limit benefits for specific treatments.

Essential Insurance

There are many types of insurance in the UAE, and they are all useful and can provide financial security in various circumstances. However, if you can get only two, make sure one is life insurance and the other is health insurance.