Jargon Buster: 10 Car Insurance Terms & What They Really Mean

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Jargon Buster: 10 Car Insurance Terms & What They Really Mean

Asghar Paracha

Even the most knowledgeable of car-owners who know the A-Z of their vehicles can find it difficult to wrap their heads around insurance policies, which are filled with complicated terms. It is important to understand that your job as a responsible car-owner does not just start with looking for a cheap car insurance policy and end with acquiring one, as knowing its contents is equally important. Moreover, even a basic understanding of auto insurance terms will help you compare the benefits offered by various insurers and make the job of zeroing in on the right policy much easier.

The Souqalmal team has decoded ten of the most commonly used auto insurance terms to help you understand the contents of your policy and be in a position to make a smart choice:

Comprehensive Policy

A comprehensive cover insures your vehicle against any unexpected event apart from a collision and is one of the highest categories of protection you can get. Things like theft, fire, vandalism, third-party damage, natural disasters, etc. are all covered under this policy.

Third-party liability

A liability coverage or TPL pays for the damage caused to the other party in an accident where you are at fault. Mandatory under the UAE law, this policy covers legal liabilities in the event of death/bodily harm sustained by the third party or any damage caused to their property.

Excess

An excess is the amount of money you have to pay when you make a claim on your car insurance policy. Simply put, this is the sum you pledge to contribute towards the cost of the claim, with the remaining amount being covered by the insurer. However, the amount varies depending on several factors such as age, type of premium, etc.

Agency repair

This option allows owners of new cars to get their damaged vehicle repaired only at the manufacturer's official dealer and not any other workshop. Car-owners can also opt for Non-Agency Repair services under which damaged vehicles are repaired at a workshop approved by the insurer.

Personal Injury Protection

PIP covers for medical expenses, funeral costs or lost wages in the event of death or bodily injury caused by an accident. It is also known as 'no-fault' cover as the claims are paid out regardless of who was at fault for the accident. The type of injuries covered under PIP may vary from policy to policy, but typically includes loss of sight or dismemberment.

Geographical area

Geographical area is the region within which your car insurance benefits apply. In other words, if an accident takes place outside the specified area, your insurer will not pay for the damages. Most insurers in the UAE offer a GCC-wide cover as an option, but it's expensive and covers only "self-damage" and not third-party liability.

Territory Extension

Most insurers in the UAE offer policyholders the option to extend the geographic coverage of their policy at an additional premium. This extenion of territory is usually offered for the neighbouring Oman specifically, or all other GCC countries (Including Oman, Bahrain, Saudi Arabia, Kuwait and Qatar).

No claims discount

We may be stating the obvious, but insurance companies love car-owners who do not get involved in too many accidents. Hence, safe drivers with an accident-free record are entitled to a no claims discount/bonus (varies from 10-20%) from their insurer upon renewal of policy.

No claims discount protection

No Claims Discount Protection is an optional policy feature ffered by most car insurance companies in the UAE. This policy add-on, which is available at an additional premium, helps protect your No Claims Discount in case you submit an insurance claim in the preceding year. This benefit is subject to conditions and limitations, so make sure you read the policy wording beforehand.

Insured Declared Value

IDV is the present market value of your car and is the maximum sum payable by your insurer in the event of a total loss caused due to irreparable damage or theft.

Replacement cover

This cover is offered by select insurance firms to ease the financial burden of car-owners in case their vehicle gets totaled following an accident. As the name suggests, the cover will pay for a new car of the same make and model as your damaged vehicle, minus the deductible amount.

GAP insurance

GAP or Guaranteed Asset Protection is an optional cover for new cars that pays the difference between the actual value of the vehicle and the sum still owed to the finance company at the time of an accident.

Off road cover

An off road cover essentially covers loss or damage sustained by your car while it's driven off road. Typically, driving on an unpaved or unmarked road is classified as off-road travel. Off road cover is usually offered as an optional add-on benefit in car insurance policies, though premium insurance policies may offer it as a standard feature.

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