About nine in UAE residents support a family member, however only a fraction have life insurance or adequate coverage for critical illness, says HSBC.
According to the bank's The Power of Protection study, 89 per cent of UAE residents are supporting a child or parent financially, yet 79 per cent do not have insurance to pay them a regular sum if a serious illness or accident prevented them from working.
"Even in the most robust market environment, uncertainty and unexpected conditions can affect any working person," said Gifford Nakajima, regional head of wealth development, retail banking and wealth Management at HSBC, Mena. "Especially when family members, living both near and far, are depending on support from people working in the UAE, financial planning should be a family priority."
Only a fifth of those with dependents have a will in place while 23 per cent retain a legally appointed guardian. The UAE ranks the second highest globally for people financing a family member. No other Middle East countries were surveyed by the bank.
The HSBC report attributed the lack of forward planning to a heightened sense of economic optimism, which far outweighed the global response. While nearly 80 per cent of UAE respondents say they are managing well or very well, globally the figure is 67 per cent.
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Steven Downey, a chartered financial analyst candidate at Holborn Assets in Dubai, said the risk of not having adequate cover in place "can be quite catastrophic".
"Best case scenario, you use up a large chunk of your savings paying for a critical illness and transitioning about a spouse's death," he added.
"Worst case scenario, you are financially wiped out and in the case of death where a spouse stopped working, they will have to move in with family and reenter the work force under great financial strain."
Zurich, Switzerland's biggest insurer, which has operations in the Middle East, recommends a young family to sign up for about 20 times their annual salary for life cover and eight times their salary for a critical illness. It said its average life cover claimant is 51 at the time of death, and the average critical illness claimant is 47.
Chris Bagnall, chief underwriting officer and head of claims for Zurich International Life highlighted the UAE's low adoption of life coverage to The National late last year by comparing global penetration rates – a measure of the total amount of money spent on insurance premiums against GDP.
In the UK, life coverage is about 11 per cent while in the US it is 13 per cent, according to Zurich. When compared to the UAE, just over 1 per cent of GDP is spent on life insurance.
Mr Nakajima said the low UAE rate is caused by a "significant lack of awareness around cost of life insurance", with some annual premiums costing about as much as the average annual car insurance. However, he said residents must also factor in the cost of delay.
"When you are young, fit and healthier, the premiums are usually lower, but as you get older and your medical history changes, costs are likely to be higher," he said.
"For example, a healthy 30-year old male can get basic term life insurance for as little as US$50 a month. Critical illness would be an additional $75 a month, so the total annual cost for both is about $1,500 – which is what motor insurance would cost for a nice car."HSBC said only about 20 per cent of UAE residents have life or disability cover that would pay out in the event of death or illness. That compares with more than 30 per cent of people globally.
