Property buyers in the UAE opting for a mortgage are advised to take term life insurance, according to industry experts. This type of insurance provides financial security for both the lender and the borrower’s family, ensuring the mortgage can be paid off in unforeseen circumstances.
Growing Demand for Life Insurance in the UAE
As the UAE’s real estate market, particularly in Dubai, continues to thrive, the demand for term life insurance is also increasing. In November 2023, Dubai recorded 12,543 property transactions, an 18% rise compared to the same month last year. Off-plan sales dominated the market, accounting for 60% of all sales with a total value of Dh15.8 billion.
Why Mortgage Lenders Recommend Life Insurance
Ayman Youssef, Managing Director of Coldwell Banker, explained that life insurance is often a requirement for mortgage approval. It serves as a financial safety net, ensuring the loan is repaid if the borrower passes away.
“Life insurance can cover the remaining mortgage balance, protecting lenders from losses and ensuring families aren’t left with the financial burden or risk of losing their homes,” said Youssef. For high-value mortgages, this adds an extra layer of security for all parties involved.
Both expatriates and Emirati buyers are generally required to have a term life insurance policy when securing a mortgage. While some policies, such as mortgage protection insurance, are specifically designed for this, a regular term life insurance policy can often fulfill the requirement. However, developers do not mandate life insurance for property purchases.
Insurance Trends Among Property Buyers
The rise in property sales and mortgages has significantly contributed to the growing uptake of term life insurance. According to Avinash Babur, CEO of Insurancemarket.ae, many buyers are now opting for these policies to safeguard their financial commitments.
“Expatriates, in particular, are driving this trend, seeking to protect their families while investing in property. Term life insurance provides peace of mind by ensuring financial stability in case of unexpected events,” Babur said.
Most term life insurance buyers in the UAE are individuals and families, as companies typically focus on offering health insurance, which is a regulatory requirement. Individual policies provide tailored coverage, meeting personal needs and offering greater financial security for families.
Understanding Premium Costs for Life Insurance
The cost of life insurance tied to a mortgage depends on factors such as the borrower’s age, health conditions, and loan tenure.
For example, a healthy, non-smoking individual in their 30s or 40s can expect to pay around Dh1,200–Dh2,000 annually for a 20-year term with coverage of Dh1 million. Younger borrowers and those without pre-existing health conditions typically pay lower premiums.
