Do You Need Life Insurance for a Mortgage?

Do you need life insurance for a mortgage in Dubai?

The short answer to the question: “Do you need life insurance for a mortgage?” in Dubai is yes, life insurance insurance is mandatory for any mortgage in the UAE.

Before understanding the importance of mortgage life insurance, let us understand the various factors that may impact your policy. 

Bear in mind that several insurance providers may recommend getting a Critical Illness Cover (CIC) along with a life insurance policy before applying for a property mortgage. A CIC is invaluable in the event that you have been diagnosed with a serious illness that prevents you from working - as it will cover your mortgage payments for a stipulated time. They also suggest having enough CIC to cover loan repayments over the course of several years. 

While you evaluate different mortgage insurance policies, the insurance provider will also evaluate your case before suggesting potential covers. The factors impacting your insurance include:

• Age 

• Occupation 

• Medical history 

• Country of origin 

• Lifestyle (e.g. smoker or non-smoker) 

There is also the question of in-house insurance policies versus external policies. Most banks in Dubai and the UAE typically have in-house life insurance policies - often offered for the convenience of the borrower. 

However, it is said that external mortgage life insurance providers may have more affordable policies. Keep in mind that some banks may allow you to obtain external mortgage life insurance while others may not. External providers may also bring an advantage of portability - allowing you to transfer your policy to another bank or property. 

Ensure that you conduct your due diligence and understand the various rules and regulations of each bank and policy provider. 

Understanding the importance of life insurance for homeowners

Having understood the fundamentals of “Do you need life insurance for a mortgage in Dubai?”, let us proceed to the importance of owning a reliable mortgage life insurance policy. 

Whether you are a foreign national, a UAE resident, or an expat, it is critical to possess a mortgage insurance policy when getting a mortgage. The insurance policy can be considered as a safety net for your family members in case of your untimely passing. Having a mortgage life insurance policy will ensure that even with your passing, your family can obtain the property without the burden of repayments - as your mortgage loan will be paid off. 

In most cases, the cost of a mortgage insurance policy is charged every month - and separately from one’s loan installment. Certain banks may even raise their interest rates to incorporate the monthly insurance premium - while others may ask you for an upfront payment for the policy. 

Bear in mind that if a married couple is opting for a mortgage insurance policy, wherein only one partner is working and holds the property and mortgage - the non-working partner does not need to obtain a separate policy. However, it is important to consult with insurance providers on what kind of coverage would be ideal for the couple. 

Be it a couple or a family, a mortgage insurance policy will provide immense relief to your family/spouse in an unexpected event. 

Impact of life insurance on real estate investment decisions

As long as you can qualify for a mortgage and life insurance, there is little stopping you from obtaining your dream home. 

Having both mortgage pre=approval and life insurance in place positions you to actively search for the perfect property and shows you as a credible potential buyer to sellers.

Obtaining the mortgage pre-approval as part of your property search will help you in several ways, including:

• Setting a suitable budget for your property. 

• Preparing your finances to ensure that they are in order, both for the upfront costs of buying the property, like the deposit and transfer costs, and the ongoing costs, like the monthly mortgage payment and insurance fee.

• You can immediately place an offer on a property you like without having to wait and undergo the process of obtaining pre-approval. This increases your chances of securing the property you want. 

Alternatives to life insurance for a mortgage

There is no alternative to a life insurance policy for your mortgage in Dubai. It is mandated by the UAE - making it a requirement for any mortgage in Dubai and any of the emirates.

Common misconceptions about life insurance and mortgages

Do you need life insurance for a mortgage in Dubai? Yes! But, what about all the misconceptions and myths about it that have been ruminating in your mind? Let us address some common misconceptions about mortgage insurance policies. 

• Many people assume that life insurance policies for mortgages are highly-priced. However, there are a variety of insurance providers in Dubai and the UAE that provide a wide range of policies that fit into any budget bracket. You can rest assured that there is a stable policy that will take care of you and your loved ones. 

• Many young people assume that mortgage life insurance is unnecessary because they are young and healthy. They think it is a step for the late future. However, note that the premiums for younger and healthier people are generally much lower given you are lower risk, making it a small price to pay for added security.

• Many people shy away from mortgages thinking that the down payment requirements are high and properties are very expensive -leading to them making the decision of renting over buying. However, the UAE Central Bank has set a minimum down payment rate of 20% for expats and monthly repayments are often much lower than the rent payments would be on an equivalent property.  

Conclusion 

Once you understand the intricacies of mortgage life insurance and how obtain it, as part of the mortgage process, you will be very well prepared to take the next steps in your property search. And to make your journey as smooth and hassle-free as possible, Engel & Völkers is at your service. 

With over 45 years of experience in the real estate sector and a global network of over 16,000 property experts who are passionate about helping you find your dream home, Engel and Völkers are here to facilitate your real estate journey in Dubai. 

Be it understanding mortgages and life insurance policies or finding the perfect house, contact us today to start your journey.