How much life insurance do you need?

There is no set amount. Insurers price cover on the sum you choose, so you need your own figure first. One method adds up what your family would need and takes away what they already have. The how much cover worksheet does the sum with your figures.

What would your family need if your income stopped?

Start with the income. Take the yearly amount your household would lose and multiply it by the number of years it needs replacing, for example until your youngest child finishes school. Then add what would fall due:

• The mortgage. If you have a home loan, check whether it already has life cover. Emirates NBD describes its home loan life cover as paying “the outstanding loan amount” on death or permanent total disability.¹ If your loan is covered that way, leave it out here.
• Other debts. Car loans, personal loans and credit card balances.
• Future costs. School and university fees for each child, for the years left.
• Final costs. Funeral costs, repatriation if your family would return home, and the cost of settling your affairs. The u.ae portal sets out the documents and steps after a death, including separate permissions if the body is taken to the home country.²

Use your own figures. A worked example with made-up numbers is on the worksheet.

What do you take away?

What your family would already have:

• Savings and investments they could use.
• Life cover you already hold, including any from your employer. Check whether workplace cover ends when you leave the job.
• What a savings or whole of life plan pays on death. Zurich’s Futura, for example, pays a cash sum on the death of the life insured.³ Ask your insurer for the current death benefit in writing.

The result is the gap. If it is below zero, your existing cover and savings already exceed the figures you entered.

How do insurers’ own rules of thumb compare?

Some publish a shortcut. Salama’s life takaful page calls 10 times your salary “a rough calculation” and lists a mortgage, debt, a child’s higher education and an emergency fund as things it could cover.⁴ A multiple of salary does not use your debts, savings or the number of years, which the worksheet does.

Zurich’s report adds that the cover you take should cover your current and future financial obligations, and that only 12% of critical illness claims it paid were above USD 200,000.⁵

Work out your own figure, then compare it with any shortcut you are given.

Do the plans set limits on how much you can buy?

Yes, a minimum and maximum, and the insurer decides on your application. Zurich’s International Term Assurance accepts AED 350,000 to AED 70 million of life cover.⁶ MetLife’s Live Life sets a minimum of AED 550,000 and a maximum of AED 183.5 million for UAE residents, and a lower maximum for non-residents.⁷

If your figure is above what one plan allows, ask about a second policy, or a joint policy covering both partners.

Should the cover fall over time?

Your need may. A mortgage balance falls as you repay it, and the years of income left to replace fall as children grow up. Decreasing cover follows that pattern: MetLife’s Live Life lets you choose a decrease of 0%, 4%, 6% or 8% at each policy anniversary.⁷ Level cover stays the same throughout.

Run the worksheet again with the figures you expect in 10 years to see how your need changes.

Who should be named to receive it?

The people the money is meant for. A payout on death does not form part of your estate under UAE law, and goes to the beneficiaries the policy names.⁸ Read naming beneficiaries before you sign the application.