Life Insurance For You & Your Family

Yes. Term Insurance is the cheapest type of life insurance because you will only be paying the cost of insurance, and no investment component.

Yes.

Being over-insured is a “waste” of money because you could have allocated your excess premiums to other saving goals. You can also be under-insured which means that the life cover or critical illness cover is not enough to protect you or your family.

Never let an agent just sell the insurance to you. You should know how much protection you need. To calculate your life cover requirement, you can use the DIME method. DIME stands for,

D – Debts
This can be your personal loans and other financial obligations except for the mortgage.

I – Income Replacement
Especially if you are the breadwinner or have dependents, losing you will greatly impact the financial capacity of the remaining family or dependents to sustain their cost of living. The amount can be calculated based on the current income or the minimum cost to sustain the family multiplied by a number of years. Usually, the number of years is based on the longest dependent years of a family member. Say if the family has the youngest child of 1 year old, the child is dependent for 20 years before s/he can survive on his/her own. Hence, income replacement should be equivalent to 20 years of income.

M – Mortgage and/or inheritance taxes
If in case the house that you are living in is under mortgage and does not have mortgage-redemption insurance, then this should be included in the life cover. Inheritance taxes should also be incorporated here.

E – Education Costs for Child(ren)
Though you might have already started saving for your kids’ college fund, you should add it in your life insurance cover as a form of protection if in case you will no longer be able to save up for this if there is loss of life.

To calculate the Critical Illness Cover, this is equivalent to 2 – 3 years worth of expenses. The main purpose of the Critical Illness cover is to sustain your cost of living while you are recovering from an illness (e.g. stroke, cancer, etc). This is not supposed to be paid to your hospital bills because it is assumed that you have sufficient medical health insurance to cover that. However, for some, this cover is used to pay the hospital bills due to a lack of or insufficient medical health insurance.

The main purpose of medical health insurance is to pay for your hospital bills while the lump sum generated by the critical illness cover of your life insurance is to be used to sustain your cost of living while you are recovering. You have to have both in order to be fully protected. Here is a sample scenario.

A breadwinner of the family had a heart attack and resulted in lower-body paralysis. He was brought to the hospital for treatment. For his hospital bills, his medical insurance covers all the expenses. He then leaves the hospital but still requires physical therapy and rehabilitation session for his paralysis. He is still not able to work hence he is not receiving any salaries anymore. Since he has critical illness cover from his life insurance, he uses it to sustain his family’s cost of living while he is still recovering.

If you are taking a cash value or permanent life insurance, withdrawing funds from your insurance will impact the following:

• cost of insurance
• sustainability of insurance

How does it impact your cost of insurance?

If your life cover is $100,000 and the cash value (investment component) of your permanent life insurance is $30,000, your insurance provider only needs to pay an additional of $70,000 ($100k – $30k) if there is a loss of life. The payout risk from the insurance company side is only $70,000, and with that amount, they calculate the cost of insurance. The smaller the payout risk, the lower the cost of insurance. Hence, if you start withdrawing funds, the insurance provider’s risk will become higher and will consequently increase your cost of insurance.

How does it impact sustainability?

If you stop paying premiums towards your permanent life insurance, the insurance provider will start taking out the cost of insurance from your investment component. If the investment is no longer enough to pay for the cost insurance, your policy will cease to exist without value, and you are no longer insured. The effect is accelerated if you are withdrawing cash from your insurance since you are consequently depleting the funds which are supposedly intended to pay for your cost of insurance.

The main purpose of the investment component in your life insurance is to pay for the cost of insurance while you are no longer paying.

If during the payment term, your investment component becomes zero, either due to market volatility or withdrawals, and assuming that you are still regularly paying your premiums, you are still insured.

However, if you have stopped paying premiums for your permanent life insurance, the cost of insurance will now be taken out from your investment. Once it depletes or becomes zero, you are no longer insured. However, prior to depleting, your insurance provider will call you up to arrange options for you to sustain our insurance.

(See also Question 5)

Majority of the large international insurance providers in the Qatar are authorized by the Isle of Man. The Isle of Man’s Life Assurance (Compensation of Policy Holders) Regulations 1991, ensure that in the event of a life insurance company being unable to meet its liabilities to its policy owners, up to 90% of the liability to the protected policy owners will be met. 

Technically, No. 

If you are single and no one depends on your income, then you don’t need life insurance because you don’t have anyone to leave it behind. Maybe a funeral/memorial plan will just suffice to pay for the final costs.

However, the best time to get life insurance is as early as possible (e.g. 18 years old or once you stepped into the workforce) even if you are still single because the cost of insurance is a factor of age and health. The younger we are, the healthier we are, the cheaper the cost of insurance.

If you are going to get insurance when you already have kids or dependents, most likely you are already older, hence, the cost is higher. In addition, you might be paying a little extra more or worst, no longer eligible to get insurance because maybe at that point in life, there have been pre-existing conditions already. Remember that insurance is not only purchased with money but also with our health. The healthier we are, the more eligible we are to get insured. Hence, it is best to get life insurance when we are younger, even if we are still single.

Also, note that we are talking about life cover or death benefit, single or not, we need critical illness protection.

Insurance providers consider the mortality rate of a country in calculating the cost of insurance. This can be affected by crime rate and accessibility to reliable health care. If your home country has a higher occurrence of crime and its health care system is not up to par with Qatar, then most likely your cost of insurance in your home country is definitely higher.

To give you an idea of how much the difference is, below is an equivalent coverage per dollar for a permanent life insurance quote in Qatar versus a quote in one of the Southeast Asian Countries for the same individual,

Qatar Life Insurance Quote
$50 coverage per $1 premium

Southeast Asian Life Insurance Quote
$9 coverage per $1 premium

Will my monthly premium change if I decide to get insurance here in Qatar but will go home for good to my home country eventually?

No. Whatever your premiums and coverage will stay the same even if you move back to your home country.

Yes. 

However, that is already costly due to old age. Also, there might already be existing health conditions that will increase the cost further or worst, no longer eligible for taking life insurance.

In addition, there is a limit to the maximum age an individual can take life insurance. This depends on the insurance provider. It varies from 64 – 74 years old. Beyond that, the individual is no longer eligible.