Dubai: Studies have shown that only a small proportion of the UAE population, about six per cent, has a home insurance cover. A survey commissioned by Zurich in 2013 found that out of the 1,009 polled residents in the UAE, 94 per cent do not have an insurance cover for their valuables.
This means that if a fire, storm or flood causes damage to the contents of an apartment, the tenants who don’t have any insurance will not be able to demand a compensation. This is because the insurance taken out by the homeowners only cover the building, not the tenants’ furniture and other personal belongings.
However, before you run to your nearest insurer and take out the cheapest policy, it’s important to know what you’re signing up for.
Like most financial products, there are certain limitations or caveats to be aware of. For instance, even if you have an insurance, you might not be able to demand a payout if a fire destroys your child’s bicycle on your balcony, or if you’re unable to recover your precious diamond ring or gold coin collection.
Jerry Parks, partner at Taylor Wessing and head of the firm’s Dubai real estate practice, attempts to answer the most common questions that UAE tenants ask regarding home contents insurance.
Question: If a UAE resident takes out a home contents insurance, will everything in the house be covered? What if I have valuable jewellery or expensive musical instruments?
Answer: The extent of your home contents insurance cover will depend on the wording of the policy. Most home contents insurance policies cover your possessions and your fixtures and fittings in the home. However, there are often limitations on the cover, including possessions left in the open (such as on the balcony, bikes or surf boards); cash and credit cards; documents, including passports, driving licenses, residency cards. In addition, some policies will specify that certain high-value items are not covered unless separately declared and itemized like jewellery, musical instruments, computers and artwork.
Question: If a tenant insures all the contents of his apartment, will the insurance company refund him the full amount? For example, if the TV set is worth Dh7,000, will he get that full amount back in case a fire destroys it?
Answer: Home contents insurance will usually require you to insure to the full replacement cost of the items in question. If this is the case, then you should receive the full cost of the replacement item. That said, most policies usually give the insurer the discretion to replace, reinstate, repair or pay. So, if it’s deemed more cost effective to repair the item, rather than pay out the replacement value, that’s what the insurance company will do. Also, you should always remember that insurance companies will apply an excess policy, under which an amount stated in the policy will be deducted from any claim.
Question: Does the fire insurance also provide compensation that the tenant can use to pay for emergency accommodation?
Answer: Again, this is a level of cover that will depend on the type of insurance policy taken out. The home contents insurance provided by most international insurance companies these days will cover the cost of renting alternative accommodation. There are however usually limits on the pay out – often expressed as a percentage of the total contents sum insured. It’s not uncommon for example to see a 20 per cent limit of total contents cover being applied for alternative accommodation payments.
Question: What happens if the fire is accidentally caused by the tenant and he happens to have a fire insurance? What sort of protection will the tenant get, if any?
Answer: Insurance is about protecting yourself in the event of an accident happening. If therefore a tenant has an accident that leads to a fire, and that tenant is insured against damage to home contents by fire, his cover will apply in the usual way.
Question: How long does it normally take for the tenant to get the insurance compensation in the event of fire?
Answer: Claims handling by insurance companies can take varying amounts of time, depending on factors such as the circumstances of the incident, the amount of damage caused, whether many units are affected or just one unit, etc. In our experience, claims settlement can take anything from 30 days to two years.
Question: Does the tenant need to hire an attorney to file an insurance claim?
Answer: It’s not necessary to hire an attorney to file an insurance claim. If, however, the insurance company is refusing to pay out in circumstances where you believe they are wrong, then it often helps to hire a lawyer to negotiate and, if necessary, file legal proceedings for the recovery of the disputed sum.
