LIFE INSURANCE

    FREQUENTLY ASKED QUESTIONS

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    How can I plan my finances?

    Expats in the UAE will find that there is no pension plan, no government funding for children’s education, no death compensation and no public healthcare. This can be dangerous without an appropriate financial plan which accounts for all the risks that household faces.

    Some things you should think about and identify are:

    1. Who are the bread earners in your household? Who are the dependents?
    2. What happens (financially and legally) if someone in the family dies, is disabled or critically ill?
    3. When are you planning to retire? How much money will you need? Is there a way that you and/or your dependents can cope with your death, disablement or critical illness after you retire?
    4. Do you have a way to deal with the costs that are related to the loss of income if you become critically ill or dismembered (lose a limb) and are not able to work?
    5. How much money will you need for your children’s higher education? What about their other major requirements in the future like their wedding?
    6. Are you a partner in a company? Are you a senior employee or some sort of portfolio manager? What happens to your company or employer in the event of your death or disablement?
    7. Where are all your earnings going? Do you know how much you are spending? Are you making satisfactory levels of income from your savings?
    8. Will your financial plan stand if you have to leave the country and live somewhere else?

    We would advise that you methodically work through all these questions and create a solid plan for the several risks that you and your household stands to face. At AFIA, we understand that these things can be very overwhelming and complicated. This is why we offer you an opportunity to meet with one of our expert consultants who will assess your needs and give you some recommendations, free of charge. It’s always nice when you have someone to walk you through such a process. Get in touch with us below and we will give you a call to organise a half an hour slot with one of our experts.

     

    What factors do insurers look at to compute my premium?

    Life insurance providers will look at many things when underwriting a policy especially for you, such as:
    – Age
    – Sex (some states have “unisex” rates)
    – Marital status
    – Number of children
    – Height / Weight
    – Purpose of the insurance
    – Health history (of you and your family)
    – Occupation / Income
    – Alcohol consumption, both past and present
    – Smoking (both legal and illegal)
    – Hobbies
    – Type and frequency of travel
    – The amount of the policy requested
    But each underwriter will value them differently. Equally, each policy will have their own exclusions and conditions, so make sure you get your personal advisor to talk you through them thoroughly.
    Each policy might have their own:

    – minimum payments
    – minimum and maximum ages covered
    – restrictions on suicide, assisted death
    – acceptable payment methods
    – maximum sum insured levels

     

    Alfred’s tips on living a healthy life!

    People often ask Alfred how he’s kept in such good shape for a man of his age. If we’re only going to live once, we should aim to live as long as we can.
    Here’s seven things to try to help you with this:
    Stress relief
    It’s not all fun and games here at Alfred HQ. It’s a fantastic feeling to be able to provide so many people with security, protection and help when they need it most, but it can be stressful too. The UAE can be a high stress environment generally, so we tell our employees that, if it’s ever getting too much, take 5 minutes to turn the tap and release the stress. Laugh. Go for a walk around the block, think about something else for a while. Breath slowly and deeply. Or ask a colleague for a massage – perhaps one you know well.
    Smoking
    It seems obvious, but smoking is the single most preventable cause of death. Smoking actually increases stress, and is responsible for nearly a third of all cancers. In fact, for people who have died under 65 in the last 20 years, nearly a fifth of them have been due to smoke related problems. Show yourself how strong you are and stop. What’s worse, your smoke will also affect the people you spend the most time with. So twice the reason to stop. And it’s an expensive hobby. Thrice the reason to stop.
    Drink more water
    Especially in the summers where the heat is unbearable, hydration is completely key to concentration. If you drank an extra litre of water every day, you’d notice how much better you felt. Try it.
    fruit and veg
    Governments all around the world are adopting this ‘5 portions of fruit and vegetables’ every day. As well they should; fruit guards against diabetes, heart disease and cancer, as well as the risk of a stroke.
    Sleep well
    Being active is important, but doing nothing is equally important. Getting somewhere in the region of 7-8 hours sleep every night is essential if you want to give every day your all.
    Eat less salt
    On average, we eat nearly twice as much salt every day as we should do. Salt raises blood pressure and increases the risk of stroke and heart disease. So next time you’re cooking and you’re searching for something to give it that extra kick, just give salt a miss.
    Optimism, sharing and smiling
    Living healthily isn’t just about what you eat or drink, it’s a mental state too. You don’t have to push weights in the mirror or cycle 10 miles to feel good about yourself, why not try sharing something? Smile more, too. These actions release endorphins, which are natural pain killers and stress relievers. And they sound like good things. It sounds corny, but try to see a little bit of good in everything too. We are lucky, just sometimes our judgement is clouded.
    Walk or swim
    When you have a fancy car it’s easy to want to drive it everywhere, especially in the heat.

    But when it’s not so warm, why not have a walk? Even twenty minutes of walking each day will be great for your heart and muscles. Or swim – there’s lots of pools around the UAE, and swimming is a fantastic workout for your body.

     

    How does life insurance play an important role across all stages of life?

    CHILDHOOD
    Childhood is a period of dependency which usually lasts until children finish their full-time education. The child’s financial needs are met by parents or other relatives and, even in societies where children start work at a young age, the child’s income rarely provides financial independence.
    However, it is useful for us to look at the financial needs provided by parents or guardians of children. The children have to be provided with food, shelter, clothing and education as a minimum. As they grow older, they will require personal spending money, money for school and social activities and, finally, the expense of higher education, possibly away from home, even overseas. The total cost of bringing up and educating a child is very considerable.

    YOUNG UNMARRIED
    With the end of childhood, most young people pass through a stage when they depend to an extent on their parents before full independence. If they are single with no dependents, they have little need for life assurance to protect other people against the financial consequences of their early death. Occasionally, a young single person supports a relative financially, such as a child or an aged parent. In such circumstances, the young person’s death would bring financial hardship to the dependent relative. The young person might therefore feel the need to take out life assurance on their own life for the benefit of the dependent relative. The term of the policy will depend on the relative’s age.
    Normally, the main protection need of a young single person in work is to protect their earnings against disability resulting from injury or long-term sickness. They might also consider the wisdom of an insurance to provide a capital sum should they contract an incurable illness.

    YOUNG MARRIED
    The needs of young people may change considerably as soon as they marry or form long-term relationships. Immediately, a young couple become interdependent with a shared responsibility for domestic costs and the achievement of future goals.
    Both partners may work and contribute to the family income. This, however, is not always the case: only one may be in paid employment, with the other looking after the family home.
    Where both partners work, they have two incomes to meet the burden of their costs. Although each of them will often still be fairly low on the earnings scale, they should have sufficient surplus funds to meet their most important financial planning needs.

    Since the couple depend on two incomes, the loss of one income would be a serious blow to their domestic economy. The priority need is therefore to protect each of their incomes against loss through disability resulting from injury or long-term sickness. They may also consider making provision against the risk that either of them may contract an incurable disease.
    Equally, if a partner dies, life assurance to replace at least part of the income of the deceased partner may be advisable. However, larger amounts of life assurance are unlikely to be necessary unless the couple are planning a family, buying a home or feeling they may be vulnerable to an unplanned pregnancy.

    YOUNG MARRIED WITH CHILDREN
    The arrival of children very quickly changes the financial situation of any young couple. Each extra mouth to feed increases the family expenditure. The availability of money to meet the family’s needs will depend on whether one partner gives up work to raise the family or whether the mother returns to work shortly after giving birth. If the mother gives up work and becomes a full-time carer, the family income is reduced by the loss of her earnings and this will reduce the money available to spend on financial planning. However, the protection needs of the family will increase greatly.

    With the whole family dependent on one income, it is even more important to arrange income replacement for the man’s earnings should he suffer injury or long-term sickness. A substantial life assurance on the wage earner’s life is now also necessary. The amount should be sufficient to preserve the family’s standard of living from the date of the wage earner’s death until the time the youngest child will become financially independent. Precisely how much cover is necessary will depend on the family’s standard of living and the age at which children are expected to complete their education.

    MARRIED WITH OLDER CHILDREN
    As children grow older they cost more to keep and educate. Fortunately, by this stage, the parents are approaching mid-career. Their incomes will usually have increased and a parent who stayed at home when the children were young may now be returning to work and increasing the family income. With improving finances, the family lifestyle will have improved and become more affluent. In most cases, the parents will have more money available for discretionary spending, including spending on financial planning.

    POST-FAMILY/PRE-RETIREMENT
    Finally, the children grow up, complete their education and become financially independent. The need to protect them against the financial consequences of parental death disappears and the cost of life assurance for this purpose ends.

    Although the protection against the financial consequences of death are now of secondary importance, there are still protection requirements to be met. Income from employment still needs protection against accident or illness. Ageing also increases the possibility of long periods of sickness, the onset of an incurable disease, or even sudden death.
    On the life assurance side, one or both partners may still need financial protection against the effect of the other’s death; and this protection may well be needed for the rest of their lives.

    RETIREMENT
    Most people would like to maintain the same standard of living in retirement as they did when they worked. Experts tell us that, to achieve this standard of living, people need an annual retirement income equal to two-thirds of their final year’s income from employment.

    Unfortunately, they also tell us that only a very small percentage of retired people enjoy such incomes and that many retired people have retirement incomes of 20% or less of their pre- retirement earnings. After retirement, the value of these incomes is often further reduced by inflation.

     

    How to budget?

    Budgeting:
    Whenever we spend money, we try to be within our budget. Therefore, budgeting of our monthly earnings is very important in our lives whether we are an employee or an employer.
    The monthly EARNINGS should be divided into 3 parts as follows:

    60% LIQUID MONEY20% SHORT – MEDIUM TERM (3 – 10 Years)20% LONG TERM (20 plus years)
    CashFixed DepositsPersonal & family Protection
    Bank A/c’sTo buy Cars / HousesChildren’s Education
    Emergency A/cRetirement
    Re-location A/c
    Last Expense A/c
      1. The 60% of the monthly earnings should be kept as LIQUID MONEY, in bank accounts or in cash. So that we can use this money for all our daily expenses.
      2. The 20% should be invested between 3mths to 10 years as SHORT to MEDIUM TERM. Under this an individual should maintain accounts as follows:
        a. Fixed Deposits / Short Term Investments
        b. Cars / Houses
        c. Emergency accounts to take care of 6 – 12 months of monthly expenses in case you are out of job or business.
        d. Re-location account to take care of our tickets / cargo if we have to relocate to ourselves.
        e. Last Expense account in case of our death.
      3. The last 20% is for LONG TERM for 10 plus years and this will take care of our future requirements like personal and family protection, children’s education and retirement.
        If we budget ourselves in a planned way then all the if’s and buts will be answered.