In the UK or USA, when the main breadwinner dies, it is a tragedy. But financially, the wheels keep turning.
Joint bank accounts remain open. The spouse can still pay for groceries. The mortgage has insurance
attached.
In the UAE, death triggers a Financial Freeze.
This is where Life Insurance stops being a “nice to have” and becomes the only key to survival for an expat
family. Here is why the legal landscape makes insurance mandatory for effective estate planning.
1. The “Frozen Account” Phenomenon
This is the most shocking discovery for widows/widowers in the UAE.
🚨 The Law
When a bank is notified of a death (via Police or Hospital), they are legally required to Freeze
All Accounts held in the deceased’s name.
Even “Joint Accounts”: In many cases, if the “Primary” holder dies, the Joint account is
frozen until the inheritance court issues a succession order.
Timeline: It can take 3 to 6 months to unfreeze the money.
The Insurance Role: An international Life Insurance policy (written correctly) pays out to
the Beneficiary directly, bypassing the local UAE bank freeze. It provides the cash flow to
buy food and pay rent while the court sorts out the main estate.
2. Sharia Law vs. Your Will
If you die without a Will in the UAE, your assets (Bank balance, Car, Property) are distributed according to
Sharia Law.
The Distribution Rules (Simplified):
- The Wife does NOT get everything. She might get 1/8th.
- The Children get a share (Boys get 2x Girls).
- The Parents (your mother/father) might get a share.
- The Siblings (your brothers) might get a share.
This can lead to complex family disputes. Life Insurance is a way to “Equalize” the estate. You can name your
Wife as the 100% beneficiary of the policy. Sharia law generally does not apply to Life Insurance proceeds
if the beneficiary is clearly named.
3. The “End of Service” Gratuity Freeze
You might think: “My company owes me AED 100,000 in gratuity. My wife can use that.”
False. The company cannot pay the Gratuity to the wife directly. They must pay it to the
Court Treasury. The Court holds it until the final inheritance ruling. It is trapped money.
4. The Loan Sharks (Debt Recovery)
In your home country, unsecured debts (Credit Cards) frequently die with you (or come out of the estate
later).
In the UAE, banks are very aggressive about recovering debt from the estate immediately.
They have the right to claim against your Gratuity and Bank Balance before your family sees a
dirham.
Life Insurance with “Loan Protection”: This pays off the debts so the rest of your assets
remain intact for your heirs.
5. Sponsorship Cancellation
If the husband dies, his visa is cancelled.
This means the wife’s visa (and kids’ visas) are also cancelled. They have a 30-day grace period to leave
the country or find a new sponsor.
This creates a frantic need for cash:
- Flights home.
- Cargo shipping.
- Canceling the Villa lease (paying penalties).
Without instant liquidity from insurance, the family is often stuck in legal limbo, racking up “Overstay
Fines.”
Case Study: The “Joint” Account Mistake
| Couple A (UK Logic) | Couple B (UAE Logic) |
|---|---|
| Kept all money in Husband’s account. Wife had a supplementary card. | Wife had her Own Separate Account with AED 50,000 emergency fund. |
| Husband Dies. | Husband Dies. |
| Bank freezes account. Supplementary card stops working at the grocery store. | Husband’s account frozen. Wife uses her own account to pay for funeral and rent. |
| Result: Dependent on charity of friends for 4 months. | Result: Independent and secure. |
FAQ: The Beneficiary
Q: Can I name a minor child (under 21) as a beneficiary?
A: BAD IDEA. The insurance company cannot pay a minor. They will pay the court. The court
will hold the money until the child turns 21. Your wife cannot touch it to pay for school fees. Always name
the remaining adult parent or a Trust.
Q: Should I write “Legal Heirs” as the beneficiary?
A: No. That throws the money back into the Sharia Court process. Name specific people (“Sarah Jones, Wife”)
to ensure speed.
there. That is the only money guaranteed to be accessible if you pass away tomorrow.