Dubai: A Dubai resident recently reported the theft of his new car. He had paid Dh95,000 for the vehicle but insured it for Dh75,000. When he approached the insurance firm, the claim was valued at Dh63,000.
Shocked, the man pointed to the policy which promised replacement of new cars if they were stolen or became a ‘total loss’ in the first 12 months. But the insurance company said the car was underinsured and the claim amount proportionately valued.
Elsewhere, an expat whose four-wheel drive met with a dune-bashing accident was taken aback when he was told he could not claim off-road damage as he had taken only an on-road policy.
Insurance companies claim most drivers are unaware of the scope of their car insurance, which carries a high risk in terms of financial implications, leading to disputes.
According to the UAE law, motorists have to take out a minimum of third-party liability coverage, which covers damage of property, death or injury to a third party caused by a driver’s vehicle. Comprehensive policies provide additional protection but with insurers competing to offer attractive premiums, the level of protection varies.
‘Common mistake’
Alison Fenech of Nexus Insurance Brokers said: “Being a price sensitive market, the most common mistake motorists make is focusing only on price. They look for the lowest premiums rather than coverage benefits. People also avoid truthful answers to questions related to their loss/accident history with the intention of gaining discounts on premiums. They tend to forget that background checks are made and if found misinterpreting facts, not only are premiums revised but claims denied in the event of a loss.”
Fenech said motorists buy minimum coverage to stay on the right side of the law. “Clients fork out a fortune to buy an expensive car. However, when it comes to paying premiums, they often opt for third party liability cover. These policies do save you money but in the event of a claim, you will be spending the money you have saved on premiums and more … The premiums vary from two to six per cent (depending on) the driver’s age, driving and claims experience, car make and model, engine capacity, value of the vehicle and benefits opted.”
Missing the fine print
Albert Rodrigues of Millennium Insurance Brokers, agrees. “GCC motorists are price sensitive and seldom understand the difference in policy benefits. They fail to understand the fine print of the cover, especially how the Rent-A-Car benefit or replacement of spare parts benefits work, and end up in a sticky situation at the time of accident repairs.”
Nikhil Mittal of Omega Insurance Brokerage said: “Some motorists don’t buy PAB cover (passengers and driver) to save money. But foregoing this cover that costs a mere Dh300 can result in serious problems. You being the owner/driver are responsible and may be liable for the medical treatment costs of those injured.”
Over-insurance
There are many “misconceptions” about over-insurance too. According to Rodrigues, “A car is precious and depreciating value year on year is difficult, particularly if you have plans to sell it. Everybody thinks that the total “sum assured” may be paid out at the time of “total loss”, if any. But the fact is, insurers calculate the market value at the time of incident and settle the case as per market rates, not as per the “sum assured”. The motorist ends up paying more premiums, being over-insured, for nothing. So report proper values of the vehicle rather than exaggerating it.”
There are other tricky issues too.
Fenech said, “The law states that an individual is permitted to drive only if he/she has a valid UAE driving licence, the car is registered and the driver is not under the influence of drugs/alcohol. If you fail to comply, you may face hefty fines or imprisonment. Drivers think that just because they are following all the criteria, they can drive any vehicle. This is not the case. Just because you have a valid driving licence does not mean you can drive your parent’s car, unless you are one of the named drivers. This is realised only in the event of a claim.”
Under the circumstances, insurance companies recommend that motorists go in for comprehensive cover.
Rodrigues said, “A comprehensive cover is a full insurance which pays for the damages of your own car (regardless of green, red or white paper, unless it is legally not payable) and also pay out to the other party for the damages of their property / motor vehicle (applicable only if you are at fault). It costs more than a third party policy. There are various options which we can add into a comprehensive insurance like agency repairs, Oman and GCC cover, windshield etc.”
Mittal recommends that a policy provides cover for natural calamity. “Otherwise, damage due to natural disasters will not be covered. You can also consider “Protected No Claim Discount”. This means if your vehicle is involved in an accident during the current policy period, the insurance company will waive, not penalise you by charging extra premium that is payable upon policy renewal.”
Buying insurance policies: Dos and don’ts
• Don’t focus on the lowest premiums – look for benefits of the coverage instead
• Don’t deceive the insurer. Be truthful while answering questions related to loss/accident history etc
• Remember background checks are made. If you are found misinterpreting facts, not only are premiums revised but claims refused in the event of a loss
• Don’t opt only for third party liability cover. Go in for a comprehensive policy
• Ask for information about add-on covers like car hire extension, agency repairs, towing services, off-road use etc. Look out for age and territorial limits
• Just because you have a valid driving license does not mean you can drive your parent’s car unless you are one of the named drivers
• Don’t forget to ask for the correct procedure when you buy a used car that already has insurance.
• Don’t under or over insure your vehicle
• Don’t forget to renew your policy without any break
