Mortgage Insurance (Life & Property)

Mandatory insurance covering the outstanding mortgage in case of death/disability and protecting the property against damage.

What is Mortgage Insurance (Life & Property)?

UAE banks require two types of insurance for mortgages: life insurance (covering the outstanding mortgage balance if the borrower dies or becomes permanently disabled) and property insurance (covering the building against fire, flooding, and other damage). Life insurance premiums are typically 0.3-0.6% of the outstanding balance per year. Property insurance is usually 0.05-0.1% of the property value annually.

Mortgage Insurance (Life & Property) in the UAE

Mortgage life insurance in the UAE must cover the declining balance of the mortgage. Some banks offer their own insurance products, while others allow you to arrange coverage independently (which can be cheaper). For Islamic mortgages, Takaful (Islamic insurance) is used instead of conventional insurance. Property insurance must cover the replacement value of the building structure.

Worked Example

Mortgage amount: AED 1,500,000. Life insurance premium: 0.4% per annum = AED 6,000/year (AED 500/month). Property value: AED 2,000,000. Property insurance: 0.08% per annum = AED 1,600/year (AED 133/month). Total annual insurance cost: AED 7,600. Note: As the mortgage balance decreases, life insurance premiums decrease too.