Auto Insurance Essay

There is no doubt that insurance plays an important role in society. Clarke (215) notes that it is responsible for spreading the risk and, if the risk materializes, then insurance spreads the resulting loss. It means that the few who need insurance  can be compensated from the contributions paid by the many who not need it but who, as people who are risk – averse, need the reassurance that, if they were in need, they would be  compensated.   (Clarke 215)

Insurance is also the way for the people to to regain control of their lives, to reduce stress, and to move towards some kind of peace of mind is by taking out insurance. Insurers know this and use this in their practice. (Clarke 215)

Khorshid (13) adds that that insurance is a part of financial and societal framework the same as banking or transportation, and that any individual, nation or religion that refuses to use it is at an immediate disadvantage. Indeed, it has to be noted that Islam is not anti-business and its principles of a fair system must be in place in order to thrive. The world of Islam will lose if it decides to block a mechanism of insurance (including auto insurance), because it allows business to experiment and cover losses. But there are no contradictions between the insurance mechanism and the Islamic laws and by careful consideration and cooperation, insurance can become a part of the Muslim’s life. (Khorshid, 13)

This report is dedicated to the research of the particular form of the insurance – auto insurance. The report discusses the role and importance of auto insurance on the whole, and especially it focuses on the issue of auto insurance in UAE.

Auto insurance is a type of insurance purchased for various vehicles, designed to arrange the financial protection of its owners from the possible damage obtained in the result of traffic accidents or theft.

According to an article “How to Choose Auto Insurance” (3) there are many myths that surround the issue of auto insurance.  But there are factors that indeed affect  the auto insurance rate: auto insurance premiums are based on car’s model, its body type,  engine size,  vehicle   age, the cost to repair it, its  overall safety record,  and the  likelihood of the theft. Additionally, the factors such as the age of the driver, the driving record and credit history also affect the auto insurance rate.

Clark (n.a.) also suggests several recommendations for consumers in any country to save on their auto insurance, including the following: 1) comparison of the insurance rates because they tend to vary depending on the insurance company, agent or broker, the coverage and the kind of car the consumer owns; 2) choice of the car that costs less to insure   (some car models are more likely to be stolen, some models cost more to repair); 3) if the customer is moving to another  area, the insurance may cost less if there is less traffic congestion in that place. (Clark, n.a.)

2.       Requirements the insurance management in the Islamic countries

According to Khorshid (159), there practical examples from different countries prove the effectiveness of the healthy balance of the supervision of insurance by the governments   and its agents. It creates the right balance between insurance companies and the insured, contributing to a steady economic environment and reducing the legal claims between insurer and insurance companies.  As for Islamic countries, including UAE, in view of State control, in order to create the insurance schemes that are Islamically acceptable, the schemes must show fairness between the insurance companies and the insurers to avoid the advantages insurance companies have over their customers and policy holders. (Khorshid 159) This principle of fairness is the key condition for Islamic insurance system.

There are certain requirements to the insurance management in the Islamic countries, such as experience and knowledge of basic Islamic prohibitions. It is essential to have direct access to advice on Islamic matters. (Khorshid, 164)

It is clear that management of funds requires exceptional skill and experience and conformity with a number of basic principles in order to ensure the successful management of a financing entity. (Khorshid, 164)

In addition, taking into account the highly technical and complex nature of insurance operations, including auto insurance, Islamic countries are the first to acknowledge the real benefits of international cooperation. (Khorshid 164)

3.      Specifics and types of auto insurances in UAE

First of all, it needs to be emphasized that auto insurance is a must in UAE and that a car will have to be insured before its registration.

There is a wide choice of insurance brokers in the region, and the companies are reliable enough for a person who insures the car to be confident that the insurance will help to avoid possible risks of damages.  Additionally, the customers often choose to purchase an all-inclusive policy that is a designed to cover more than one vehicle at affordable rates which makes it the most appropriate and efficient choice of auto insurance in UAE.

There are two key car insurance covers being offered in UAE: Comprehensive Car Insurance and Third Party Liability Car Insurance.

  • Comprehensive UAE Car Insurance.

This type of auto insurance is more expensive and it needs to be pointed out that the cost of it varies depending on terms of the specific insurance company.

  • Fully Comprehensive. This type of auto insurance covers damage on the car, but includes certain limitations and exclusions. There is a legal obligation for insurance firms to provide this at a certain maximum price level, such as 3 to 5 percent of value of the car.  (“Auto Insurance in Dubai”, Web)
  • Comprehensive with options. This type of auto insurance covers options such as dealer repair, free hire car, free insurance in Oman and other GCC nations, and recognition of no claims bonuses (from UAE and/or overseas) for an extra cost. Therefore, the person the person who wants to insure a car is required to pay 3 to 10 percent of the value of car, depending on the company, and no claims bonus. (“Auto Insurance in Dubai”, Web)
  • Comprehensive premium level. This type of auto insurance is similar to the previous level but the person who wants to insure a car will have to pay an extra 1 or 2 percent of the value of the car. It’s also important to note that expatriates have special conditions in this case: they may bring an original no claims bonus certificate, which is worth up to 40 percent discount on the normal rates in UAE. (“Auto Insurance in Dubai”, Web)
    • Third Party Liability Car Insurance.

This type of auto insurance is one of the common car insurance policies in the UAE and also the most affordable for the population. According to the law, third party liability coverage is the minimum level of motor insurance necessary for all vehicles driven in Dubai. This helps pay out after the excess, in case you happen to unfortunately collide with any cars or pedestrians. This is often considered essential, as more expensive cars and medical bills may often incur huge expenses than the cost of the vehicle itself. However, third party liability only covers the owner’s liability in the unfortunate event of injury or death, or damage of property of third parties. It is the legal minimum auto insurance which is required for the car owned in the UAE. (“Auto Insurance in Dubai”, Web)

  1. Requirements for obtaining and cancelling car insurance in UAE

There is a list of requirements for a person who wants to get a car insurance in UAE that mentioned the article “Auto Insurance in Dubai” (Web).  There are several ways to get insurance: it could be done online, or through telephone, and also through insurance brokers who can arrange quotes from various companies to choose from. (“Auto Insurance in Dubai” Web)

A person who needs an auto insurance needs to present a valid UAE residence visa and UAE driving license, with a minimum of one year validity. Proof of previous no claims discount, if any, should also be provided when arranging insurance, as it can make considerable difference in the cost.

Here is the list of the documents usually required by insurers in UAE:

  • Valid passport with residence visa
  • UAE driving license
  • Sight test and/or copy of home driving license
  • Vehicle details, age, and model of the car
  • Proof if no claims, if any.

The article “Auto Insurance in Dubai” (Web) claims that auto insurance policies in UAE generally have a validity period of 13 months, covering one-month grace period permitted following expiry of registration. The registration will have to be renewed annually, and this renewal is not possible without proof of insurance. (“Auto Insurance in Dubai” Web)

As for the requirements to the procedure of cancelling auto insurance, it can be arranged through the written notice, via registered mail addressed to the insurance company. But obviously, the specific conditions of cancelling insurance will depend on the terms of the insurance company.

Conclusion

 

Based on the information presented in the report, the following conclusions could be made. First of all, auto insurance is a type of insurance that purchased for various vehicles in order to protect the owners of these vehicles from the possible financial risks in the cases of damage and other cases reflected in the insurance terms and conditions. Secondly, the auto insurance is inevitable condition for any car owner in UAE.  Also, there is a particular principle that regulates the insurance schemes in the Islamic countries, including UAE – the principle of fairness in the relations between the insurance companies and the insurers.

In addition, there are two major car insurance covers in UAE: Comprehensive Car Insurance and Third Party Liability Car Insurance.   The first type is more complex and expensive while the second type is the basic, most common type of car insurance policies in the UAE and also the cheapest one. 

 

Works cited

Clarke, Malcolm A. Policies and Perceptions of Insurance: An Introduction to Insurance Law. Oxford: Clarendon Press. 1997. Print.

Clark, Mike. Suggestions Help Consumers Save on Auto Insurance. The Florida Times Union. May 30, 2001. Print

Khorshid, Aly. Islamic Insurance: A Modern Approach to Islamic Banking. New York: Routledge Curzon. 2004. Virginian-Pilot. Print

“Auto Insurance in Dubai”, Web, 4 Dec. 2013, <http://www.guide2dubai.com/info/auto-insurance.asp>

“How to Choose Auto Insurance.” Daily Herald (Arlington Heights, IL). February 28, 2010, p. 3. Print

 

The terms offer and acceptance. (2016, May 17). Retrieved from

[Accessed: March 29, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016.

[Accessed: March 29, 2024]

freeessays.club (2016) The terms offer and acceptance [Online].
Available at:

[Accessed: March 29, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 29, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 29, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 29, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 29, 2024]
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