Property insurance and mortgage (life) insurance in Dubai, UAE
It’s no secret there are many steps and costs involved in the home-buying process in Dubai. Although there is plenty of interest in buying real estate in the UAE, awareness of the importance of insurance coverage is still lacking. If you buy property in Dubai, whether directly or through a mortgage, there are a few insurance-related things you should know. The below includes insurance types you need when buying a property in Dubai and the UAE in general.
Property insurance or Home Insurance
First of all, property insurance in Dubai can have three components: building, contents and personal belongings insurance.
Building insurance
In case of accidental damage, fire, natural disasters, or water damage, building insurance covers the permanent structure of a home contained in bricks, concrete, and roofs made of incombustible materials. This means that the building insurance covers the cost you’ll have to pay to repair the damage that was caused to your property.
It's not the original purchase price or current market value of the building that determines the value of the building required, but rather what it would cost to rebuild in the event of damage. In Dubai, building insurance is a prerequisite for any mortgage. Building insurance premiums are significantly less than the purchase price, ranging from 0.02 percent to 0.07 percent of the insured amount annually.
Contents insurance
Contents insurance covers household items, such as furniture, kitchen appliances, interior decorations and home electronics, against accidental damage, fire, natural perils and theft. The insurance amount should correspond to the total present value of all items in the house or the amount necessary to replace the contents if they were all completely lost.
Personal belongings
Personal belongings insurance is optional and usually refers to things that a person commonly brings outside the house, such as watches, jewelry, laptops, mobile phones, etc.
Note. The master developer or the owner of a residential complex is required by United Arab Emirates law to insure the entire building. So, if you’re buying an apartment in a residential building in Dubai, it should already be insured.
Property insurance for off-plan properties
There’s no formal insurance to cover your off-plan property and investment in the UAE, however, there are laws that protect the funds of property buyers. For example, the money invested in Dubai real estate that is still under construction goes into an escrow account rather than to the developer directly. The developer’s able to access the funds once the building has reached a particular phase of construction. The best course of action in these circumstances is to select a reputable and trustworthy developer.
Mortgage life insurance
Life insurance is mandatory if you’re planning on getting a property in the UAE through a mortgage. Mortgage life insurance is a type of insurance that’s intended to cover your mortgage debt in the event of your death. Most banks charge it on a monthly basis, independent of the loan. While some banks will require you to pay the insurance in advance, others will raise their interest rate to cover the monthly fee.
There’s also a cheaper option - taking out life insurance via an independent insurance company. Some banks accept life insurance policies from other organizations, however, each bank reserves the right to require life insurance under their program.
You must account for life insurance premium payments as an ongoing expense of mortgaged property ownership in your budget. For non-smokers under the age of forty, life insurance costs are relatively low for an average loan. However, expenses can rise rapidly as you get older, get sicker, and require more insurance.
Note. All pre-existing medical issues must be disclosed; otherwise, your claim could be denied and your family might not get the insurance benefit when they most need it.
To Sum Up
As you’ve seen in this article, these types of insurance are one more thing to think about when buying a property, but they could surely provide financial protection and peace of mind.
We advise you not to rush when choosing an insurance package and insurance company - take your time, do a little bit more research and carefully read the fine print. On the other hand, Kredium offers the best of UAE mortgages and real estate and provides end-to-end support, so if you need help with mortgage financing or finding the perfect real estate in Dubai for you, sign up or get in touch with us.
Visit our blog section for more information on the real estate and mortgage industry in the UAE.
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