Second Hand Car InsuranceMay 18, 2023
In recent years, secondhand cars have been in high demand.
As people look for more cost-effective ways to purchase a vehicle, the shift towards buying pre-owned cars that have been professionally serviced is rising.
As per reports, the United Arab Emirates used car market’s value came to arounda USD 20.03 billion in 2021.
The number is expected to hitUSD 32.07 billion by 2027 - showcasing a CAGR of approximately 11%.
Secondhand cars are generally an affordable option when compared to brand-new cars. Additionally, buying a used car can allow a person to get a higher-end model that may have been out of their price range for a new car.
Although buying a secondhand seems to be an appealing option, it requires a lot of paperwork, including transferring ownership, registration documents and, most importantly, purchasing car insurance. Insuring a secondhand car is just as important as insuring a new vehicle.
What is secondhand car insurance? Why is it important to buy a secondhand car insurance policy? Read on to find out.
What Is A Secondhand Car?
Cars that have been previously owned by one or more people are known as secondhand cars or used cars.
What Is Insurance For Secondhand Cars?
Insurance for secondhand cars is the same as standard car insurance. It covers your vehicle against the damages caused due to an accident or theft as well as protects you financially against any losses or damages caused to the third party by your car - depending on the type of insurance you choose.
Why Do You Need Insurance For Your Secondhand Car?
As mentioned earlier, buying insurance for a secondhand car is just as important as purchasing insurance for a new car.
These are some of the reasons why car insurance for secondhand cars is a must -
1️⃣It Is A Legal Requirement
According to Road Transport Authority (RTA) rules, it is mandatory to have at least third-party liability car insurance.
Driving without car insurance in Dubai can result in fines of up to AED 500, as well as black points on your licence.
2️⃣To Safeguard Your Finances
The main purpose of a car insurance policy, whether it’s for a brand new or secondhand car,
is saving your out-of-pocket expenses. The level of financial coverage you receive depends on the type of policy you choose.
➔If you want to cover only third-party liabilities, you can go for third-party liability insurance. This will help you take care of any loss/damage you cause to a third party or property.
➔On the other hand, if you want to cover any losses or damages incurred by you, your vehicle, as well as the third party, you can opt for a comprehensive policy.
3️⃣To Avoid Black Points On Your Licence
A black point is a strict penalty used to deter drivers from violating the rules and can also be combined with fixed fines. The lowest number of points you’ll accrue is 2 and the highest is 24. If you drive without insurance, you'll receive 4 black points on your licence.
4️⃣It Covers Third-Party Liability
If you cause damage to a third party involving your vehicle, you are liable to compensate them for their expenses. Your insurance policy protects you against any such damages caused to a third party or their property involving your vehicle.
Types Of secondhand Car Insurance Policies
There are two types of insurance policies for cars, regardless of whether they are secondhand or brand new.
As its name implies, comprehensive car insurance provides comprehensive coverage,
meaning it covers you, your vehicle, and damages incurred by the third party or property because of your vehicle.
Arhan has comprehensive car insurance for his secondhand car. On his way to work, he accidentally collided with another vehicle. The impact caused substantial damage to his vehicle as well as the vehicle of the third party. Since Arhan has comprehensive car insurance, the insurer will take care of the damages sustained by both his vehicle and the third party's vehicle.
👉Comprehensive Policy Coverage
Damage to your car and its accessories, including damaged parts and spare parts, is covered by your comprehensive insurance under the following circumstances:
1️⃣Damage arising out of an external fire or explosion, spontaneous combustion, or lightning.
2️⃣Robbery or theft.
3️⃣Damage caused to your car due to an accident, collision, turnover, incident, etc.
4️⃣Damages caused during the transportation of goods on land, inland waterways, elevators, or lifting machinery, including loading and unloading processes related to those modes of transportation.
5️⃣Damages caused by the deliberate actions of a third party.
In the case of an accident, the insurance company will -
●Return your vehicle to pre-accident condition by repairing any part of it, including its parts, accessories, and spare parts.
●Pay for the loss or damage in cash if you've agreed to it.
●Replace the damaged vehicle in case of a total loss. They will, however, pay the same amount in cash if you request it.
●Take responsibility for all costs associated with securing the car and transporting it to the nearest repair shop, if your car becomes immobile after an accident.
🚗Third-Party Liability Policy
Third-party liability insurance is a legal requirement in the UAE.
It protects you against any loss or damage caused to another person or their property because of your vehicle.
The insurance company will cover -
1️⃣Death or permanent disability caused to another person, including motor vehicle passengers.
2️⃣Any damage caused to the property of another person.
In the event of an accident, a police report is filed in the UAE with the following details -
➔At-Fault Party:< The person who is at fault for the accident and liable for paying other parties involved in the accident.
➔Not At-Fault Party: A person who was involved in an accident but did not cause it.
As per the police investigation, the At-Fault Party is responsible to cover both third-party property damage and bodily injury. This also includes other vehicles that have suffered damages as a result of the accident caused by the At-Fault Party.
Aleem has third-party liability insurance. When she was driving, she met with an accident causing severe damage to another vehicle. In this case, Aleem’s third-party liability insurance will cover the repair costs for damages caused to a third party’s vehicle.
Now that you know what’s covered by car insurance, let’s understand what’s not covered by it -
Exclusions Of Car Insurance
There are certain circumstances for which an insurer will not provide coverage. These are called exclusions. Here are some common exclusions -
👉Mechanical Or Electrical Damage:
There is no coverage for mechanical and electrical damage to the car caused by use, breakdown, defects, or breakage.
Damages to tyres that are not caused at the same time as the car accident are not covered.
No coverage is provided if the damage is caused due to overloading, exceeding the permissible width/length/height, or exceeding the permitted number of passengers - provided that this is proven to be the actual cause of the accidental damage.
👉Vehicle Used For A Different Purpose
In case the vehicle suffers damage while using it for any other purpose than what was mentioned in the insurance certificate, no coverage will be provided.
Fathima bought car insurance for her personal vehicle and specified the same at the time of policy purchase. A few months later, she started using it as a taxi. If her car suffers any damage, the insurer will not provide coverage since she is using her car for a different purpose than what was mentioned in the policy.
👉Driving Outside The Geographical Limit
Car insurance policies restrict coverage to a specific geographical area. There is no coverage for accidents outside of these areas unless an extension is purchased. For instance, you can purchase an Oman Extension Cover if you are a frequent traveller to Oman which will take care of the expenses you incur in case of an accident or car theft in Oman.
The policy will not cover damage caused by speed races or tests.
Akyas bought car insurance for his secondhand car. Every day, he commutes to work by car. One day, he and his friends decided to race their cars for fun. His car, however, skidded due to speeding and suffered severe damage. In this case, the insurer will not cover the damages since he used his car for racing.
Damages to the car will not be covered if it is driven by:
➔A person who does not possess a valid driving licence
➔A person who is not licensed to drive according to traffic laws or
➔A person who drives with an expired licence and fails to renew it within 30 days of causing an accident.
➔A person whose licence has been suspended by a court or competent authority or as a result of traffic regulations.
Your policy will not cover off-road damage unless you add an off-road extension.
Amir goes off-roading with his friends. During the ride, his car flipped and hit a tree - causing severe damage to the bumper of the car. Since Amir’s insurance policy does not cover off-road damages, the repair costs will have to be borne by him.
👉Damages Due To War
The policy does not cover war-related damages.
👉Driving While Intoxicated
The policy will not provide coverage if the vehicle suffered damage while the driver was under the influence of alcohol, drugs, or narcotics.
Fahad has car insurance for his secondhand car. He drove his car under the influence of alcohol after attending an office party. Unfortunately, he met with an accident causing severe damage to his car. His policy will not cover the damages, since he drove the vehicle in an intoxicated state.
👉Natural Disasters :
The policy does not cover accidents caused by natural disasters like floods, tornadoes, hurricanes, volcanoes, earthquakes, etc.
There are, however, some insurance companies that provide coverage for natural disasters.
Therefore, you must check your coverage in detail or seek assistance from insurance professionals.
A common question that lingers in most of the sellers’ minds is whether their car insurance policy can be transferred to the new owner's name. Well, let’s find out.
Can You Transfer Car Insurance From The Old Owner To The New Owner?
No, it is not possible to transfer the policy from one person to another.
Every time an insurance policy is transferred, the Road Transport Authority, also known as the RTA, needs to be notified and then, it will need to update its records. They also need to issue a new registration card/Mulkiya copy.
Transferring a policy is not technically possible. This is because when a policy is transferred from one person to another, the risk profile changes. You may or may not pose the same level of risk to the insurer as the previous owner. When there is a change in the risk profile, the policy issued in the name of the old owner will not be suitable for you.
Let’s understand this with an example:
Azar, living in the UAE, has purchased a brand-new car and wishes to sell his old one. His diving experience spans 6-7 years, and he has always been a safe driver.
Imran, an American national is currently living in the UAE. He is interested in buying Azar's car. However, Imran has a bad driving record and has only 1 year of driving experience. Here, there is a change in the risk profile. Hence, the policy owned by Azar will not be suitable for Imran.
As the risk profile changes, so do the terms and conditions. It is important to remember that the nationality of the owner is also a factor that has an impact on the premium. A car's premium will therefore vary depending on its owner's nationality as well.
Note: When buying a secondhand car, you need to ensure that the ownership of the car is transferred to your name with all the correct formalities as per RTA rules. And, prior to submitting the transfer request to RTA, you, as the new owner, will need to arrange car insurance for a period of 13 months from the date of transfer.
Wrapping up! :
So, in case you are interested in buying a secondhand car, ensure you insure it with an ideal car insurance policy. Make sure that you choose the car insurance policy based on your needs and requirements. Doing so will give you peace of mind that your car is well-protected, no matter what may come its way.