What life cover does your bank require with a mortgage, and can you choose it?

Mortgage life insurance pays off what you still owe on your home loan if you die, and in some policies if you become permanently and totally disabled. Emirates NBD’s key facts statement describes its home loan life cover as covering “the outstanding loan amount in respect of Death and/or Permanent Total Disability of the borrower”.¹

Must you have life cover with a UAE mortgage?

That is up to the lender, and it must tell you. The Central Bank’s mortgage regulations require loan documents to state the insurance requirement.² Its consumer protection standards say that where insurance or takaful is a mandatory part of a loan, the bank must disclose the purpose of the cover and its cost in writing.³

Check the insurance requirement in your loan documents before you sign.²

Can you choose the insurer?

Yes, within limits. Where cover is mandatory, the bank must tell you that you can choose a provider from at least three insurers or takaful companies it has approved. If you do not choose within a reasonable time, the bank may choose from that list.³ The bank must also tell you if an insurer belongs to the same group as the bank.³

Where life cover is offered alongside a loan but is not required, the bank must tell you in writing that you can accept or refuse it.³ Where credit insurance is a requirement, the standards say you must get it from regulated companies the bank proposes.³

Ask the bank for its list of approved insurers in writing, and ask whether it accepts assignment of a policy you already hold.

How is bank mortgage cover charged?

It can be a percentage of what you still owe, charged each month. Emirates NBD’s representative example uses 0.018% a month: AED 144 in the first month on a balance of AED 800,000. It says the fee is charged monthly from the date the loan is paid out and varies with the loan balance.¹ As you repay, the balance and the premium fall.

The consumer standards require the bank to tell you about that extra cost if insurance is added to the loan principal.³

See your own figures year by year with the mortgage cover calculator.

Can you use your own term policy instead?

Some term plans are built for it. Decreasing cover falls each year in line with a repayment loan. MetLife’s Live Life offers decreasing cover at a yearly rate of 0%, 4%, 6% or 8% for terms of 5 to 30 years.⁴ Sukoon Takaful’s Family Takaful Term mentions mortgage assignment, and its built-in critical illness payment does not apply to decreasing cover or mortgage assignments.⁵ Zurich lists repaying a mortgage or loan among the uses of its level term plan.⁶

Whether a bank accepts a policy you buy elsewhere, and on what terms, is for the bank to say. Ask before you buy, and get its answer in writing.

How long do you have to change your mind?

At least 5 complete business days after signing an insurance contract with a bank, under the consumer standards, unless a longer period applies or you sign a written waiver.³ The bank must get your consent to the insurance separately from the loan application or contract.³

Life cover sold with a loan, called credit life, is excluded from the illustration and disclosure articles of the Central Bank’s life insurance instructions, except long-term single-premium cover sold by an intermediary.⁷ The insurer must still get a separate confirmation from you that you are paying the premiums, and give you the policy documents, brochure, benefits and charges.⁷

Keep the separate consent form and the policy schedule with your loan papers.