In the UAE, getting your vehicle insured is mandatory. Determining your vehicle insurance premium isn’t a straightforward calculation. It can be pretty complex. However, not many people are aware of the factors that are taken into consideration when calculating the premium. Some of these are car related aspects while others are driver related aspects.

One of the important things to note is that vehicle value plays a big role in determining your insurance premium, a lot of which is not just dependent on the type of car you drive but also the insurance provider you select. In this article, we highlight how this factor comes to play.

It all begins with the type of vehicle you drive. The fancier the car (for example, a luxury or sports vehicle), the more it will cost you to keep it intact. Also, vehicles that fall in this category sometimes tend to be a limited edition / rare model therefore resulting in costly spare parts. Your insurance provider will typically look at factors such as:

• The make of the car
• Its model – if you opt for the luxury edition, chances are the premium will be higher than that on a standard edition.
• Fuel type
• Transmission type
• Engine size – generally, cars with larger engines tend to be more expensive to insure.

Having said that, buying the car at a cheaper rate does not translate into a lower premium either.

Along with the actual value of the vehicle, the value you put on it also matters when calculating the premium. Overvaluing the vehicle at the time of purchase results in a higher premium. This point is particularly important because in the case of an accident, your insurance provider will only take into account the vehicle’s current market value. Therefore, if it’s a situation where the vehicle is a complete write-off, chances are you’ve wasted your money paying high premiums because the insurance company will only pay out the market value.

However, it is also important to remember that the value of the vehicle is not the sole basis for premium calculation. It is always measured up against other factors such as:

Your age

In the UAE, it is common for new drivers (those with a driving licence issued less than a year ago) and those below the age of 25 to pay a rate up to 20% higher than what the rest would pay for their vehicle insurance premium. This calculation is done keeping in mind the risk factors associated with lack of experience on the road as well as the correlation between age and car accidents.

The UAE law also states that drivers under the age of 25 have to pay 10% of the total damage if the accident is caused by them, irrespective of the age of the person under whom the car is registered or insured.

Your vehicle’s age

Remember: the younger your vehicle, the higher the premium. This is calculated keeping in mind that that repair works on newer cars tend to be more expensive. However, this does not mean that cars that have been used longer will be cheaper to insure. Insurance premiums for older cars could come at a relatively high price tag because there are certain risks associated with older cars. These include: the vehicle not functioning properly or being prone to more damage in the case of an accident.

Your history on the road

If you’ve been involved in accidents in the past or have violated traffic or other road rules, chances are that you would end up paying a higher premium for it. The good news for those with a clean record is their eligibility for a no-claims discount. And if you haven’t heard of the no-claims discount before, here’s a summary of what it does for you. It’s a reward system for safe drivers, officially announced by the UAE Insurance Authority earlier this year. If you have a clean record on the roads, you can get discounts of up to 20% on your insurance renewal. In some cases, insurance providers have been known to provide a discount of up to 50%, once they’ve analysed the driver’s risk profile.

According to the announcement made by the UAE Insurance Authority, the insurance provider will provide a 10% discount on the minimum premium if no claims were raised in the previous insurance year, a 15% discount if no claims were raised during the previous two years and a 20% discount if no claims were raised during the previous three years. The idea is to encourage policyholders to drive safely so there are a fewer accidents on the road, in a goal to lower death rates caused from road accidents.

Lastly, the depreciation value

For those of you concerned about the value of your vehicle depreciating every year but the premium increasing, it is important to know a couple of things. Firstly, as soon you drive out of the showroom with your new vehicle, remember the value has already depreciated by up to 20% and this further depreciates as time goes by.

However, parts of your insurance policy most affected by depreciation are those related to collision and crash factors. These work on the theory that, when involved in an accident, the costs to an insurance company of damage to a new car is a lot more that what it would be a few years later, when the value has depreciated. But there is always room for negotiating as many insurance companies do offer discounts when reminded about the depreciating value of the vehicle, particular when no claim has been raised in the previous insurance years.

But on a positive side, not all policies are affected by depreciation. Property damage insurance, comprehensive coverage and personal injury insurance are some of the policies that are not directly tied with the vehicle therefore prices won’t be affected as the vehicle becomes older.

Though the value of the vehicle is depreciating, the insurance premium doesn’t drop in the following scenarios:

• Inflation – general costs of maintenance or repair go up as market prices go up each year.
• Standard costs – the costs associated with repairing a vehicle remain the same irrespective of model year.
• Claims – making a claim costs you more to insure your vehicle in the following year.

We hope that this artcile on how the vehicle value impacts your car insurance premium would help you in making a smarter choice. To compare some of the best car insurance quotes in UAE, please check out

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