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Five Factors to Consider When Purchasing Mortgage Protection Insurance in the UAE

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If you are buying a property in the UAE you will also need to take out mortgage protection insurance. Life insurance and building insurance are mandatory when taking out a mortgage in the UAE. Life insurance or Mortgage Protection insurance as it is sometimes known is there to cover your repayments in case you were to pass away. Building insurance covers the structure of the building. They are two separate products and you will need both.

In addition, there are other insurance options you may need or wish to consider. Here is a list of considerations to bear in mind when insuring yourself, your property, and your mortgage.

1) Life insurance is compulsory for anyone taking out a mortgage in the UAE

Mortgage protection or life insurance covers your mortgage in the event of your death. This is another cost you will need to factor into the mortgage process.

Some banks will ask for you to make the mortgage insurance payment up front, while others will add it to the cost of your monthly repayment, and some may raise the mortgage interest rate you have been offered to cover the cost. Make sure you find out from your lender how your mortgage insurance will be paid for so you can factor in these costs.

The cost of your insurance will depend on your age and whether you smoke. The price will rise if you are over 40, and or you are a smoker. As with any other insurance such as health insurance, you will need to disclose any pre-existing health conditions, or else any claim may be denied to your family down the line.

2) If you want to save yourself some money, research the market and take out life insurance independently of the bank your mortgage is with.

However, not all banks will accept mortgage insurance from a third party. Banks are within their right to insist you take their mortgage protection. Asking your mortgage broker about mortgage protection or life insurance rules is a good thing to do so you know where you stand.

3) Building insurance is also compulsory.

Building insurance covers the structure of your home (this means bricks, concrete, and roofs) against accidental damage, fire, natural disasters, or water damage. Building insurance claims are not calculated on the property purchase price or current market valuation, but rather on what it would cost to rebuild.

You can expect to pay 0.02-0.07% of the amount you are insured to annually in building insurance premiums.

4) Contents and personal belongings insurance are not compulsory but you may wish to consider them for your peace of mind.

Contents and personal belongings insurance are two different things, though you may find an insurance product that covers them both. Make sure you are aware of the definitions and what is covered in both contents and personal belongings insurance so you are clear on what is covered.

Contents insurance covers household items, such as furniture, kitchen appliances, interior decorations, and home electronics, against accidental damage, fire, natural disaster, and theft. The insurance amount should amount to the total value of items in the property, or the amount necessary to replace the items if they were all lost.

Personal belongings insurance covers items you would typically take out of your home. It can include watches, jewelry, laptops, and mobile phones.

In both the case of contents and personal belongings insurance, shop around to find a great deal. Using a comparison site will help you find the right insurance product at a reasonable cost per month or per year.

5) Are you buying off the plan? If so then you will usually pay a deposit before the completion of the property.

Be mindful that there is no formal insurance scheme to protect off-plan buyers. However, your money will be held by a third party and not accessible by the developer before completion. Make sure you buy a property from a reputable developer.

If you're wondering how much you could borrow towards the cost of your new property, use our mortgage calculator. This will give you an idea of how much your monthly mortgage repayments would be. Just remember to factor in your insurance liabilities.

Got any other home mortgage questions for us? Check out our FAQs.

This blog is for educational purposes, but everyone's case is unique, and local guidelines and regulations may change. Our mortgage advisors can help you with any question you may have and have the latest advice. Get in touch.

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