Car InsuranceMarch 21, 2023
Today, having a car is more than just a luxury. It has become an essential asset for many daily activities, from commuting to work to running errands. Moreover, owning a car gives individuals more freedom to explore their surroundings and enjoy the convenience of travelling at their own pace.
However, driving also comes with its own perils. Although rules around seat belts, using a mobile phone while driving, reckless driving, ignoring traffic lights, and driving under the influence of drugs or alcohol have all been strengthened, road safety remains a major concern, and risks to life and health remain ever-present. It is no surprise that with such a scenario, even the most experienced drivers have to be on their toes at all times.
Did you know, as per reports, the number of road accidents in the UAE increased in 2021 to 3,488 from 2,931 in 2020?
An accident can leave you with damages to yourself and your vehicle that can cost you quite a bit. Sometimes, you may cause damage to another person or their property, which can have financial repercussions as well. To protect yourself from the financial burden of such events, it is important to obtain car insurance. Moreover, as per UAE Road Transport Authority (RTA) Law, it is mandatory to have at least third-party insurance for your car.
So, car insurance is not just for complying with the law, but for peace of mind and protection against potentially large financial losses.
Let's discuss car insurance in detail.
What Is Car Insurance?
Car insurance offers financial protection against loss or damages caused to the car because of an accident, theft, a natural calamity, etc. It provides coverage to you, the insured vehicle, a third-party person, and property - depending on the type of policy you choose.
Why Is It Important To Have Car Insurance?
These are some of the reasons why car insurance is a must -
1️. Legal Requirement
As mentioned earlier, car insurance is important because it is mandatory, according to the UAE Road Transport Authority (RTA) Law, to have at least third-party liability car insurance. Plus, having car insurance will help you to cover any financial losses that you may incur due to an accident, theft of your car, etc.
Not having car insurance in Dubai may lead to a fine of AED 500 and also lead to penalties in the form of black points on your driving licence.
2️. To Prevent The Addition Of Black Points To Your Licence
Black points are strict penalties implemented to keep drivers from violating the rules. The black point system also works with a combination of fixed fines. For instance, driving without a valid insurance policy will attract 4 black points on your licence. The lowest black points that you will receive are 2 and the maximum is 24.
3️. Financial Protection
If you get into an accident with a third party and it is found that you are at fault, the law states that you are liable to pay the third party for any damages caused to them or their property. Having insurance coverage for your car will make sure that you are shielded against any such expenses.
And, if you purchase a comprehensive policy, it will also cover any losses or damages that you or your car incur during an accident, theft, or similar incident.
4️. Option to Customise
Car insurance also provides you with a wide range of covers such as roadside assistance, rent-a-car facility, GCC coverage, off-road coverage, etc.
Types Of Car Insurance In The UAE
There are two types of car insurance in the UAE - Comprehensive Car Insurance & Third-party Liability Insurance (TPL).
Comprehensive Car Insurance
As the name suggests, Comprehensive Car Insurance gives you complete, all-around insurance coverage. This type of insurance policy covers any third-party liability as well as the damages caused to you and your vehicle. The best of both worlds!
For instance, Rita has comprehensive car insurance. While driving to work, she hit a bike unexpectedly. Due to the impact, the bike sustained severe damage, and her car's headlights and windshield got damaged too. Since she has comprehensive car insurance, both the damages sustained by her vehicle as well as the damage caused to the third party's vehicle will be covered.
What Does A Comprehensive Policy Cover?
Comprehensive car insurance will compensate you for the loss or damage to your car and its accessories, including damaged parts and spare parts in the following circumstances -
1. Damage caused to your car due to an accident, collision, turnover, incident, etc.
2. Damage caused by an external fire or explosion, spontaneous combustion, or lightning.
3. Robbery or theft.
4. Damages caused by the willful actions of a third party.
5. Damages that occur during the transportation of goods on land, inland waterways, elevators, or lifting machinery, including loading and unloading processes related to those modes of transportation.
In the case of an accident, the insurance company will:
1. Repair your car, or any of its parts, accessories, or spare parts, and bring your vehicle back to its pre-accident condition.
2. Cover the loss or damage in cash if you have agreed to the same.
3. Replace the damaged vehicle in case of a total loss. However, if you want the amount in cash, they'll pay the same upon raising a request.
4. Assume all costs associated with securing the car and transporting it to the nearest repair shop, if your car becomes immobile following an accident.
Third-Party Liability Insurance (TPL)
Third-party Liability Insurance covers any loss or damage caused to another person or their property because of your vehicle. It is a legal requirement in the UAE.
What Does Third-Party Liability Insurance Cover?
The insurance company will cover -
1. Death or permanent disability to another person, including motor vehicle passengers.
2. Any damage caused to the property of another person.
For example, Ayan buys third-party liability insurance that also offers coverage for third-party legal liability. While driving, he meets with an accident that damages another vehicle. The third-party liability insurance purchased by Ayan will cover the repair costs for the damage caused to the third party's vehicle.
How Is The Third Party Compensated In The Event Of An Accident?
When an accident occurs in the UAE, a police report is filed, containing the following information -
➔ At-Fault Party:
The person who is at fault for the accident and who is responsible for paying other parties involved in the accident.
➔ Not At-Fault Party:
The person who was involved in the accident but was not responsible for causing it.
As per the police investigation, the At-Fault party must pay for both third-party property damage and bodily injury.
Note: The term Third Party Property Damage (TPPD) also includes “other vehicles” which have sustained damages due to the accident caused by the At-Fault Party.
Now that you have understood the types of car insurance, let’s have a look at how you can enhance the coverage you have - with add-ons.
Add-Ons In Car Insurance
Add-ons are optional covers that you can add to your base car insurance policy to widen your coverage at a certain extra cost.
These are the various add-ons that you can customise your car insurance with -
1️. Personal Accident Cover
It provides financial protection against expenses incurred due to bodily injuries sustained in an accident.
2️. Agency Repairs Cover
It provides coverage for car repairs at the original manufacturer's workshop. You can, therefore, be assured that only genuine parts will be used to repair your car rather than less expensive replacement parts. The add-on is generally valid for 2 years and can be increased to 5 years by certain insurance companies in exceptional cases.
3️. Roadside Assistance Cover
It is offered by car insurance companies either as part of their basic cover or as an add-on. It provides coverage for mechanical repairs, towing, flat tires, battery boosts, etc.
For instance, Anusha buys comprehensive car insurance with roadside assistance cover. A few months later, she goes on a solo road trip when suddenly, her car stops in the middle of the road due to a flat tire. In this case, she can use the roadside assistance cover by contacting the insurer who will arrange for a mechanic to fix the flat tire.
4️. Gulf Cooperation Council (GCC) Coverage
It is offered by some car insurance companies to those who frequently travel to neighbouring GCC nations, such as Bahrain, Kuwait, Oman, and Qatar. Using this feature, you can get coverage in these countries if you suffer any damage or injury while driving. Those without GCC coverage may not be able to enter the country.
5️. Car Rental Cover
Some insurers provide a rent-a-car service if your car is damaged and in the garage for repair work. This add-on covers the cost of renting a car in the event of an accident or significant damage to your car.
6️. Off-Road Cover
This cover is designed for individuals who frequently participate in off-road activities in the UAE, such as desert rallies, dune bashing etc. It provides coverage for any injuries sustained during these activities and any damages caused to your vehicle.
Say you purchased an off-road cover since you love taking part in off-road activities. One morning, when you were participating in dune bashing, your vehicle broke down in the middle of the ride. Since you own an off-road cover, the insurer will cover all the expenses associated with fixing your vehicle.
7️. Oman Extension Cover
If you travel frequently to Oman, you must add this cover to your car insurance, since you will not be permitted to enter Oman without it. It covers damages and injuries caused to you and your car but not third-party damages. You can buy third-party insurance online or at the border.
Note: The list of add-ons provided by insurers will vary across insurers. Some insurers may offer some add-ons as an in-built feature, while others may charge you for them.
Exclusions Under Car Insurance
Exclusions are certain circumstances for which the insurer will not provide coverage. These are some of the common exclusions under car insurance -
Mechanical Or Electrical Damage
Any damage caused due to the use, breakdown, defect, or breakage of the mechanical or electrical components of the car is not covered.
Damages due to overloading, exceeding the permissible width/length/height or the permitted number of passengers will not be covered, provided that this is proven to be the proximate cause.
There is no coverage for damages to tyres that are not caused at the same time as the car accident.
Vehicle Used For A Different Purpose
You will not be eligible to receive the claim amount if you damaged the vehicle while using it for any other purpose than what was specified in the insurance certificate.
For instance, Ayesha bought car insurance for her personal vehicle and specified the same during the policy purchase. A few months later, she began using it for commercial purposes. If her car sustains any damage, the policy will not provide coverage since she uses the vehicle for a different purpose than what was stipulated in the policy.
If the vehicle is damaged as a result of a speed race or test, the policy will not cover the damage.
The policy will not cover any damages if the car is being driven by - Someone without a valid licence or
➔ Someone who is not licensed to drive according to traffic laws or
➔ Someone who holds an expired licence and fails to renew it within 30 days from the date of the accident.
Any damage caused by someone whose licence has been suspended by a court or competent authority or as a result of traffic regulations will not be covered by the policy.
Driving While Intoxicated
No coverage will be provided if the vehicle is driven while under the influence of alcohol, drugs, or narcotics.
Driving Outside The Geographical Limit
The coverage of your car insurance policy may be limited to a certain geographical region. Accidents outside these areas are not covered unless an extension is purchased.
Damages resulting from war will not be covered by the policy.
Off-road damages will not be covered unless you have added an off-road extension cover to your policy.
Violation Of Law
The policy will not cover if your car suffers damages or loss due to accidents caused by a violation of the law - if the violation implies an intentional felony or misdemeanour according to the relevant Federal Penal Code.
There is no coverage for accidents caused by natural disasters such as floods, tornadoes, hurricanes, volcanoes, earthquakes, etc.
Purchasing car insurance today is easier than ever, thanks to the internet. Let’s find out how you can purchase car insurance online without any hassles.
How To Purchase Car Insurance Online?
Insuring your car is an easy process. Although the process may vary from insurer to insurer, here are some general steps that are to be followed -
1.Visit your desired insurance company or any insurance broker's website.
2. Click on the ‘Car Insurance’ option.
3. Enter details about your vehicle, such as vehicle make and model, model year, and car variant.
4. You will be asked if your vehicle is Gulf Cooperation Council (GCC) specified or not. Accordingly, select the appropriate option.
5. You will then be asked to provide your name, email address, birth date, mobile number, and nationality.
6. After entering these details, you will be asked to select the city where your car is registered and the driving experience you have.
7. Next, you'll be asked whether there have been any claims in the past. If no claims have been made, click "Never" and proceed, and if any claims have been made, select the correct option.
8. Once you have filled out all the details, you will be taken to the quote page.
9. A predefined car value will be displayed, which you can increase or decrease based on the market value of your car.
Whenever you visit a broker's website, you will be able to see a variety of quotes from different insurers. Check out the plan details and premiums and choose a policy that suits your needs.
Documents Required To Purchase Or Renew Car Insurance
The following documents are required for purchasing car insurance:
➔ Driving Licence
➔ Passport and Residential Visa
➔ Vehicle Registration Certificate
➔ Emirates ID
Purchasing car insurance is essentially entering into a contract with the insurance company to cover vehicular damages/losses, in exchange for a premium. How is the premium calculated? Are there any factors that influence it?
Let’s see -
Factors That Affect The Premium Of Your Car Insurance
1️. Cost Of Your Car
Your car's value is one of the main factors that affect your premium. Here’s how -
➔ If your car value is more than AED 300,000, it falls under the 2.75% premium bracket.
➔ If your car's value is within the range of AED 100,000 to AED 300,000, it falls in the 3% premium rate range.
➔ If your car’s value is less than AED 100,000, the premium rate will be 3.5%.
2️. Driver’s Age
Car insurance premiums are also affected by your age. You may be charged a higher premium if you are under 25 years of age, because studies have revealed that young drivers have a higher tendency to get into accidents due to reckless driving.
3️. Type Of Coverage
The coverage you select can affect your premium. Since comprehensive coverage covers a wide range of incidents - any third-party liability as well as the damages caused to you and your vehicle, it will cost more than third-party liability cover.
4️. Type And Features Of The Car
High-end cars usually have a higher premium because their spare parts are expensive and they require more maintenance than other standard cars.
5️. Driving History
Bad driving history, such as violations of traffic rules or multiple claims in the past, will increase your premium. People with such a driving history are marked as high risk by insurance companies, and therefore their premiums will be higher than those with a clean driving record.
For instance, Rahim wanted to renew his car insurance. However, when the insurance company evaluated his claim history, they found that he has submitted multiple claims in the past. Hence, the insurer charged him a higher premium to compensate for the risk.
6️. Deductibles Or Excess
A deductible or excess amount is the amount you must pay before the insurance company steps in to pay the rest of your claim amount. Premiums are lower when the deductible is higher.
Car insurance premiums are also influenced by discounts provided by insurance companies. If you have not made any claims in the past, you can get No Claim Bonus discounts, which will reduce your car insurance premiums.
Can You Reduce Your Car Insurance Premium?
Yes! Here are some ways to reduce your premium:
1️. Go For A Higher Excess Or Deductible
By taking a higher excess amount, you will be able to pay a lower premium. The higher the excess, the lower the premium. It is important to note that while taking an excess amount will reduce your premium, you will also have to pay this amount when making a claim.
Suppose you have an excess of AED 700, and in the future, you meet with an accident resulting in a bill amount of AED 6000, then you will have to pay AED 700, and the insurance company will cover the remainder. It is therefore very important to choose this option carefully.
2️. Keep Your Eyes On The Road
A bad driving history, an accident history, or a history of filing more claims may make your insurance premiums go up. You will be considered a risky individual if you are one of these people, and you will pay a higher premium. When you violate any traffic rules in the UAE, you will be given black points on your licence. The black points get accumulated over time, and if you accrue too many, you will face the consequence of having your licence suspended. So, stay safe while driving and make sure you follow all the rules.
3️. Compare Car Insurance
You shouldn't simply select the first online car quote you see. It is important that you compare insurance policies appropriately as per your needs and choose one that is suitable for you. Comparing insurance online will show you that there are different types of coverage offered by different insurers.
Examine each quote carefully and choose the one that fits your budget and covers your car according to your requirements.
4️. Select The Coverage As Per Your Requirement
If you are interested in reducing your premium, a third-party liability policy will be a cheaper option. However, this is an appropriate choice for older vehicles, or for vehicles that you do not use much, or for vehicles that you will be selling soon. A comprehensive policy will be a better option if you have a new car or are a frequent traveller.
5️. Choose Add-Ons Wisely
Some insurance companies provide you with a few add-ons as an in-built option, while others may charge you for them. It is important to assess your needs before selecting any such add-on, otherwise, you will be merely adding to your insurance costs. For example, almost all insurance companies offer the Oman extension cover. You need this coverage if you frequently travel to Oman. This add-on is not recommended if you don't intend to travel to Oman in the future.
6️. Install Anti-Theft Devices In Your Car
You may be able to reduce your insurance premium if your car has an authorised anti-theft device installed.
Before purchasing any car insurance policy, you need to be mindful of certain things - so your hard-earned money doesn't go down the drain. Let's look at them.
Factors To Consider Before Purchasing Car Insurance
Here are a few things you should consider before purchasing car insurance:
1️. Check Policy Details And Plan Type
In order to select the right insurance policy, it is essential to know what the policy covers. To get full protection for your car, you should buy a comprehensive policy, but if you only need minimal coverage, you can purchase a third-party liability policy.
2️. Understand the Excess
Your car insurance premium will be reduced if you have an excess or deductible. However, you need to be aware that you will be required to pay the excess/deductible amount at the time of claim before the insurance company begins to pay. So don't take an excess/deductible unless you are sure that you won't make any claims.
3️. Compare Quotes
Before making a purchase, make sure that you compare different quotes from different insurers online and compare all insurance features and coverages, and then choose the one that meets your needs.
4️. Read The Fine Print Carefully
It is important that you read all the details of the insurance policy before making a payment. Be aware of what is and is not covered in the policy, so that you are not caught off guard when you make a claim.
A car insurance company, for example, will not cover any accidents or damages caused to the car that occur outside the geographical area, any indirect losses that may occur to the car, or any devaluation that occurs because of its use, breakdown, defect, or breakage of mechanical or electrical devices.
5️. Additional Deductibles
During claims, some additional deductibles will be applied by the insurer. When filing a claim, insurance companies may charge additional deductibles in the following circumstances -
➔ The driver of the car was below the age of 25 when the accident occurred. The additional deductible is 10% of the compensation amount.
➔ A sports car or a modified car for which a claim is raised will be subject to an additional deductible of 15%.
➔ There will be an extra deductible of 20% when you make a claim for a rental car.
Note: This is just an exhaustive list. In order to see a complete list, you will need to read the policy wording.
Now comes the crucial part - the claim process. It is important to understand every step involved in the claim process before purchasing the policy so you don't run into any problems at a time of need.
How Do You File A Claim?
To ensure a seamless claim process, follow the below steps:
1. Inform the police
➔ When an accident occurs, the first thing you need to do is notify the police.
➔ You cannot file an insurance claim unless you file a police report.
➔ If there are any injuries or damages to your car, take pictures of them.
➔ Your car will be inspected by the police, as will the accident scene and your photographs.
➔ You will receive the policy report which includes the details of the "At-Fault Party(Responsible for causing the accident)" as well as the "Not At-Fault Party(Not responsible for the accident)", a summary of the damages caused to the vehicles involved in the accident, etc.
➔Any minor accident can also be reported via the policy apps.
2. Get in touch with your insurer
➔ As soon as you obtain the police report, call your insurer to inform them of the accident.
➔ In order to speed up the claims settlement process, ensure that you provide the insurance company with all the details pertaining to the accident.
➔ A complete set of documents must be submitted to the insurance company.
Documents required for the claim:
● Police report.
● Car Registration Document (Mulkiya)
● Driving Licence
● Duly Filled claim form
● Emirates ID
● Car modifying certificate (If any)
● Any other docs as asked for by the insurer
3. Assessment of claim
Once the insurance company receives your claim request and the relevant documents, it will assess your claim and verify your documentation. Your insurance company will approve the repairs once verification is complete.
➔ After the insurance company approves the repair, you may take your car to the authorised dealer/garage. A repair estimate will be generated by the dealer/garage and shared with the insurance provider.
➔ Once the insurance company approves the rate, work will begin on your vehicle.
➔ After the repair is completed, you can pick up your vehicle from the dealer or garage.
Next, when it comes to a third-party claim, it can be categorised into 2 types - Third-Party Property Damage (TPPD) and Third-Party Bodily Injury (TPBI).
Third-Party Property Damage (TPPD)
If you damage the property of a third party, you may be liable for compensating them. Say you hit another vehicle and you are at fault for the accident. The third-party may get in touch with their insurer for processing the claim, who will begin the recovery process from your insurer - provided the third party has a comprehensive policy.
In the event the third party does not have insurance or only has third-party coverage, they are required to go directly to the claims office of your insurer to file their claim.
Third-Party Bodily Injury (TPBI)
An accident that causes the injury or death of a third party may give rise to this type of claim. All such claims are handled entirely by the court.
Here are a few common steps:
1. When TPBI claims involve serious injuries or death, the police will arrest the driver (if alive). The purpose of this is to protect the recovery rights based on Shariah law.
2. Furthermore, there are provisions whereby the court accepts a "Letter of Guarantee" from the insurer and their promise to represent the insured in the legal proceedings to release them.
3. In the event of an accident, the insurance company issues a letter of guarantee to ensure that damages or compensation will be paid. In addition to serving as proof of insurance for the vehicle involved in an accident, it also provides assurance that the insurance company will pay for any damages or provide compensation as per the amount decided by the court.
4. Even if the driver is eligible for release, his passport and Emirates ID will be confiscated until the case is settled and compensation is paid. This is to ensure that the driver does not flee the jurisdiction and prevents them from travelling until the case is settled and any compensation due is paid.
5. If the insured is found to be guilty of criminal negligence that caused a third party's death, the Public Prosecution Court will adjudicate the case and award Diya Money - Blood Money of at least AED 200,000/- along with fines and imprisonment, if necessary.
6. The legal heirs of the injured or deceased third party may also pursue additional compensation through a civil lawsuit. However, please note that a loss that occurs outside the state is not covered by the policy.
Taking a car for a ride involves a number of risks. The increase in private vehicles has increased the likelihood of road accidents and traffic violations. To ensure that you're always protected, it's important to choose the right car insurance policy with adequate coverage.