Understanding living benefits: Your financial safety net in times of crisis

Unlike life insurance, which pays upon the death of the individual to their beneficiaries, living benefits come into play if you are diagnosed with a severe illness (like cancer or heart disease).

Treatment and recovery can be long and difficult, often leading to job and income loss. As an expat in the UAE, this could possibly mean losing your health insurance and even having to leave the country if your visa is tied to your employment.

Recovering from a serious illness is tough not only physically and mentally but also financially. Many people don't realise how big the financial burden can be.

The most common misconception

“I have medical insurance, so I don’t need a Critical Illness cover.”

Many people believe that having medical insurance cancels out the need for Critical Illness coverage. Let's take a closer look at why that’s not entirely accurate.

What’s the difference? Medical insurance vs. Critical Illness cover

• Lump sum payout: Medical insurance will only pay for the hospital or clinic. It's designed to cover medical expenses at the time they occur or after the fact. With Critical Illness cover, you get a lump sum payment right after you're diagnosed. For instance, if your coverage is for USD 200,000, that entire amount goes straight into your account once you file a claim, and it's processed.
• Coverage limits: Typical employer-provided medical insurance might cover around AED 200,000 per year. This might be enough for minor health issues but falls short for serious illnesses like cancer, which require extensive and expensive treatments.
• Out-of-network treatment: If you need to get treatment outside your insurance network, things can get complicated and more expensive.
• Savings drain: Even if you have good savings, they're probably meant for big goals like buying a house, your child's education, or retirement. Insufficient medical insurance could force you to use these savings, leaving you financially stressed.

Unpacking the numbers

Over the past few years, we've seen a steady rise in the total amount of claims paid out. While this might indicate that more people are covered, it also means more people are making claims.

The really eye-opening statistic here is that the majority of these claims—56%—are for living benefits. This figure has climbed from 48% in 2022 to 50% in 2023 and 56% in 2024. Essentially, more people are surviving serious illnesses thanks to advancements in medical care. However, the financial aftermath often goes unnoticed.

Did you know?

In the last three years, Zurich Insurance has paid out a staggering USD 210 million in life and critical illness (CI) claims. A closer look reveals that 56% of these claims were for living benefits. So, what does this mean for you?

What actions can you take?

Always ensure that Critical Illness cover is part of your life insurance plan, and make sure it’s adequate to get you through tough times.

While mandatory medical insurance is helpful, be aware of its limitations, including coverage limits, network restrictions, and what exactly is covered.

Remember, Critical Illness cover acts as an income replacement, helping you manage the financial impact of a medical emergency by paying upfront upon diagnosis.

In contrast, medical insurance only covers medical bills already incurred. By understanding and acting on this information, you can better prepare for life's unexpected challenges and safeguard your financial future.

The best way to do this is by consulting with an insurance advisor.