Personal Loan Insurance in UAE - Job Loss Insurance UAE

Personal loan insurance UAE acts as a safety net for you as a borrower. If something unexpected happens, the insurance steps in to cover the remaining loan amount. This saves you and your family from the burden of the loan. It’s especially beneficial for those depending solely on their salaries to repay the loan.

Overview of Personal Loan Insurance UAE

The concept of any loan insurance UAE is pretty straightforward. 

In case of your death or permanent total disability (PTD), the insurance covers the outstanding balance. This makes it a well-structured safety net for yourself and your family.

How Does Personal Loan Insurance UAE Work?

Insurance for personal loans functions through a specific process that connects directly to the loan agreement. Let’s understand it in more detail -

1. Insurance Linked to Loan Agreement
When you get a personal loan in UAE, the bank may offer an option for loan insurance. No medical certificate is usually required for enrollment. 
The concept remains the same, although the name of this coverage may vary.  Some popular names include ‘loan shield insurance’, ‘credit life coverage’, and more. 

2. Premium Payment
The bank may charge the premium for personal loan insurance UAE in two ways -

• One option is to pay it in one go, although this is rarely available. 
• In the more popular way, the bank adds a nominal amount to the instalment. It calculates this as a percentage of the outstanding amount. 

3. Covered Events & Conditions

If you pass away or face any covered event, the insurance company steps in. It pays off the outstanding amount to the bank/lending institution. Thus, you or your family no longer have the responsibility for the debt. 

Here are the covered conditions -

• Death
• Permanent total disability (PTD)

4. Benefit Payment

In the event of death or PTD, the insurer settles the outstanding loan balance.

5. Additional Points 

• The coverage is usually worldwide. It means that even if the borrower passes away in another country, the loan insurance UAE can provide coverage. 
• Insurance for loans may have certain minimum and maximum age limits.
• If you voluntarily resign from your job, the insurance won’t cover the loan.

Is Personal Loan Insurance Mandatory for Borrowers in the UAE?

No, it’s not mandatory to get personal loan insurance UAE while borrowing. 

However, considering the benefits for such a nominal premium, it’s always advisable to get this coverage. Here are some benefits -

• Peace of mind 
• Protection for yourself and your family from debt in unfortunate circumstances
• Straightforward coverage
• Nominal premium
• Smooth claim settlement

Key Factors to Consider Before Choosing Loan Insurance UAE

While considering insurance for personal loan, it’s important to pay attention to a few points -

1. Scope of Coverage:

• Make sure that the insurance includes at least death and permanent total disability (PTD) as covered events. Some optional coverage plans may cover critical illness as well.
• If you travel often or live abroad, check if the policy has worldwide coverage.

2. Premium and Payment Method

• Find out whether the premium is a 

- One-time cost OR 

- A repeating payment

• Look at the total cost over the duration of the loan.

3. Age & Eligibility Limits

Check the age limits. Banks usually have lower and upper limits for this type of insurance. Most of the time, insurers only accept applicants below the age of 65-70 years.

4. Exclusions and Waiting Periods

Know the waiting periods and the causes not covered. This could be suicide, self-injurious harm, and so on.

5. Optional vs Mandatory Enrollment

If you don’t have life coverage, it’s good to get bank loan insurance — even if it is optional.

What Happens If You Lose Your Job While Having a Loan in the UAE?

Losing your job can negatively impact your finances as well as existing loans. Let’s check whether insurance can be of help in such cases -

• Insurance for personal loan in UAE typically does not cover the outstanding amount in case of job loss
• Thus, even without a job, you will still need to pay the instalments
• If you fail to pay on time, you can face consequences such as

- Decreased credit Score
- Legal action
- Bad credit history

In such cases, you can turn to some alternatives -

• Contact the lender to request loan restructuring or deferment. However, keep in mind that deferment is usually available only at the bank’s discretion. 
• Look for alternative income sources to prevent default.

Important

1. In such cases, the most useful type of insurance is job loss insurance. In case of involuntary unemployment, it provides a portion of your income for a certain period. You can use this amount to pay instalments and manage other expenses.
2. Job loss insurance is not the same as personal loan insurance.

Personal Loan Insurance vs Life Insurance in UAE

While borrowing, many among us also turn to life insurance for coverage. After all, it provides a lump sum amount if you pass away or face any covered event. 
However, it’s quite different from loan insurance UAE. Let’s understand how -

Feature	Personal Loan Insurance	Life Insurance
Purpose	Cover the outstanding loan amount	Financially protect family/nominees
Who Gets the Payment?	The bank	Nominees/your family
Coverage Amount	Up to the remaining loan	Chosen by you
Coverage Period	Loan repayment period	Selected by you — could extend well beyond the loan period

Key Takeaways!

• If you only want coverage for the loan repayment period, go for bank loan insurance. 

• However, if you want overall coverage for your family beyond the loan tenure, choose a life policy.

Frequently Asked Questions (FAQs)