Finally Understand How Your Car Insurance Premium Is Calculated

Finally Understand How Your Car Insurance Premium Is Calculated

While every vehicle owner in the UAE has car insurance, very few actually know how companies calculate the price. We take a look into this black box to understand the different factors insurers use to determine your premium, which can help you make sure you are getting the best car insurance rate in the future.

Base Rate

Each car insurance company in the UAE will start with a base rate. This is a percentage that is applied to the value of the vehicle to determine the starting price for your premium. Usually, there is a different rate applied for a regular vehicle, an SUV or 4x4, and luxury vehicles. For example, for a saloon or sedan, the rate can be as low as 2.25%, which means that if the car is worth AED 100,000, the insurance premium will be AED 2,250 annually.  Note that there is also a minimum premium, for example, many insurers will charge at least AED 850 annually, although this depends on the vehicle’s classification. So if your car is worth AED 20,000, you will still have to pay the minimum premium.

Agency Repairs

The basic insurance coverage may not include agency repairs, which means you can not go to your dealer to fix your car in case of an accident. To add agency repair, 0.4% to 0.5% is added to the rate. Always watch out for restrictions on this option, as some insurers will only cover dealer repairs for the first two to three years of the car’s life.

Sports Vehicles

Insurers refer to increasing the premium based on specific factors as loading. Sports vehicles are typically subject to loading of 15% to 25%. Some companies will increase the premium by a fixed amount (such as AED 500) depending on the engine size.

Optional Benefits

If you select options such as roadside assistance or car rental, a fixed amount is added to the premium. For example, roadside assistance cover can cost you an additional AED 30, while getting a replacement vehicle for six days will translate to AED 200 more on your premium.

Age, Experience and Nationality

If the driver is below the age of 25 or their UAE driver’s license is less than one year old, the car insurance rate can easily go up by 15%. The same applies to certain nationalities.

Each insurance company uses a different model for pricing car insurance, but it is always some variation based on the above factors. For this reason, it is crucial to speak to an insurance expert (i.e. bayzat!) when you are getting car insurance quotes. 

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