Only 28 per cent of UAE families have insurance to protect their income should they become ill or disabled and nearly one-fifth have coverage in case of premature death, a report said.

Just under half (49 percent) of Western expats and about a third (34 percent) of Asian expats had income protection, with only 14 percent of UAE nationals and 13 percent of Arab expats being covered, according to the study Zurich Insurance Group (Zurich), the global insurer and the Smith School of Enterprise and Environment at the University of Oxford.

Very few government provisions exist for expats in the UAE and companies will only provide limited cover to help with employee income protection. Therefore, it is important that expatriates in the UAE take individual responsibility and seek out the right level of cover to suit their personal needs.

A third of respondents claimed they would be willing to consider buying insurance and pay an average of 6 percent of their monthly income for it. A perceived high cost of income protection was the consistent reason given for being unwilling to consider buying insurance across all countries. Cost perceptions pose a barrier in the UAE as well as other countries as 31 per cent of people believe protection insurance costs are higher than they actually are.

The average critical illness cover Zurich International Life, Middle East recommends for a young family is a five to eight times multiple of annualised income and life insurance cover is around twenty times annualised income. With an income of $100,000 this would mean a life cover of $2 million and critical illness cover of $500,000costing a premium of $10 a day.

Ultimately, this is 3.5 per cent of the annualised salary and is therefore lower than the percentage of income that individuals are willing to spend on income protection. However, Zurich states it is important to emphasise that every individual situation is different and therefore financial advice is important.

Globally, the study showed that those individuals who have insurance are not necessarily more financially literate but were instead influenced to buy insurance by first or second-hand experience of people they know having suffered a disability, illness or have passed away which resulted in a loss of income.

The study shows a 35 per cent higher purchase of Income Protection by those with first or second hand experience of someone who has experienced a loss of income, globally. This confirms behavioural research showing ‘subjective knowledge’ gained through life experience has a much stronger impact on action and decision-making than objective knowledge that is formally learned.

UAE specific results of the study show people are more influenced by those who have suffered a more life threatening case such as stroke, cancer or heart attack, making up 40 per cent of reasons for income loss, than by those 26 per cent who experienced a loss of income due to stress or emotional causes.

Jason Waldron, Zurich’s protection expert said: “This shows the importance of a healthy lifestyle as one preventative measure that can lead to a decreased chance of illness and disability and a lower likelihood of income loss. Nevertheless, it is essential to start planning early as the cost of delay could be significant as health does generally not improve over time.”

“Protection is a vital part of financial planning because when income stops coming, everything else stops. Experience creates a key demand for insurance, unfortunately for some the demand for insurance only comes after the event and often this is too late. Therefore, it is important people in the UAE take individual responsibility and seek financial advice from a qualified adviser to determine the right level of cover that suits their personal needs,” added Waldron. – TradeArabia News Service