Accidents are emergency situations that are unpredictable and most of the time not under our control. At times, the damage to the car is extreme and beyond repair. In this situation, if your car is covered under insurance and you apply for a claim your car insurance pays you for the value that it claims. This money can be used to repay the remaining car loan (if any) or to buy a new car or however, you want to use it.
However, most of the time, people do not get the expected returns which can be sufficient to repay the leftover loan. In this case, even thinking of buying a new car from the insurance claim is an odd plan. This happens because the customers do not even have any idea about how the insurance companies value their cars. The companies do not reveal the entire methodology of this but having basic knowledge can be helpful.
Let’s see how to estimate the cost of car insurance in the UAE
For taking insurance, you need to be ready financially as it will cost you a few percent of the car value. Let us look at the base starting rate:
- If the value of the car is less than AED 100,000, the base starting rate will be around 3.5%.
- If the value of the car is more than AED 100,000 and less than AED 300,000, the base starting rate will be around 3%.
- If the value of the car is more than AED 300,000 and less than a million, the base starting rate will be around 2.75%.
Now let’s look at some discounts and sub charges:
- Drivers age
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- The age is between 23 and 25 – 25% added
- The age is between 25 and 30 – 15% added
- The age is between 30 and 60 – 10% deduction
- Vintage of driving license
- If the UAE driving license is less than one year old – 25% added
- Car Type
- If your car is a 4 wheeler or SUV – 10% deduction
- If it is a sports car or coupe – 20% added
- If it is a brand new car – 10% deduction
- If the car is not registered in Dubai – 5% added
- If the car is three to five years old and you include repair cover – 30% added
- Added AED 120 for the personal accident benefits of the driver and AED 30 per passenger.
- Added AED 150 if you wish to hire a car till the time your car is in repair after the accident.
- During ‘claim free’:
1 year no claims – 5% deduction
2 year no claims – 10% deduction
3 year no claim – 15% deduction
4 year no claim – 20% deduction
5+ year no claim – 25% deduction
The above are just rough indications and they all differ from company to company and according to times.
The Insurer Car Value (ICV) affects the car insurance premium directly.
Factors that affect the car value
The factors affecting the ICV of your vehicle are as follows:
- For this case, the size of the vehicle matters the most. Small vehicles and large vehicles fall under different categories.
- The showroom price of that particular model of the car.
- The age of the vehicle also matters a lot in this process. The more the age is, the lesser the value is.
How the ICV of a vehicle affects the premium of the insurance policy.
Taking this in layman’s language then the greater the ICV of the vehicle is, the higher the premium rate goes.
How to reduce the premium of the car insurance
Here are a few ways to reduce the premium on the car insurance
- The insurance companies encourage the customers to drive safely. They charge a low premium when the policyholder confirms not filing any claim for the previous year.
- In the same way as above, if you continue to drive with full safety and the policyholder does not file any claims in the policy year as well. In this case, the customer is eligible for ‘no claim’ offers and discounts.
- Installing security gadgets in the car leads to better security and less risk exposure. In this case, also the premium decreases.
What to expect in a car valuation process?
When you report an accident to the insurance company to following steps are taken by them:
- The first task is to categorize that whether a car is totaled (when no repair is possible) or not. Many times, the insurance company declares the car as totaled, even if it can be fixed. This is done when the cost of repair exceeds its actual value.
- If the vehicle is totaled, an appraisal is conducted and a value is assigned to the car. Here the money needed to repair is not the appraisal. An appraisal is the estimated value of the car just before the accident took place.
- Then the company looks into a third-party appraisal just to ensure that no mishandlings took place in the situation.
Actual cash value and replacement value
The actual car value is the estimated amount which someone would pay for the car after assuming that no accident happened. This is termed ASV and weighs lower than the actual price that you paid to buy the car. On the other hand, replacement cost is the amount needed to buy a similar car which was damaged. But in replacement cost as well, you are paid for a car which is a step down from the wrecked one. The actual car value is even less than the replacement cost.
In this case, a wiser decision would be taking insurance which ensures giving a replacement cost which is, the market value of the same model of the car which was damaged. This will however increase your monthly premium as compared to normal insurance.
These all can be frustrating situations but being a little smart and informed can help you. Always compare a number of insurances before reaching a final conclusion. Choose the one which suits you the best and read all the terms and conditions properly. Always keep an alternate emergency fund for this kind of situation. This will help to reduce the amount of stress and tension to some level.
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