Top Ten Factors That Affect Your Insurance Premium


Have you ever wondered how an insurance company calculates your insurance premium? You might be surprised to learn that there are several factors that can directly (or indirectly) affect your insurance premium costs. One such factor is the particular Emirate for your vehicle’s registration. Some insurers actually rate vehicles registered in Dubai or Abu Dhabi at lower premium rates, compared to those registered in the Northern Emirate areas. Below is a list of the top ten major factors that can directly (or indirectly) affect your insurance premium:

1. Your Claims History

Drivers who have a history of auto accidents, or have received a number of tickets for violations of traffic rules, normally find themselves paying a higher premium rate. If you can prove to your potential insurance provider that you have not been involved in any accidents over a specific number of years, you can receive a No Claims Discount (NCD) upon submitting a No-Claims letter from your previous insurance provider. Keep in mind that the No-Claims letter is provided free of charge.

If you have just relocated to the UAE, some car insurance providers might also consider a No-Claims letter from your previous insurance provider located in your previous country of residence.

2. Your Age and Driving Experience

For an insurance provider, your age and the resulting years of experience behind the wheel are a way of analyzing the risk of a possible accident(s). Drivers under the age of 30-years-old and over the age of 65-years-old are typically seen as a higher insurance risk; as a result of which they normally pay a higher car insurance premium.

If you are a new driver, you should be prepared to be charged a higher premium rate due to your lack of experience on the road. If you recently moved to the UAE and can prove that you have adequate driving experience from back home, your insurance provider might take that into consideration and lower your premium rate.

3. The Type of Vehicle You Own

The age of your vehicle has an impact on your insurance premium cost. Whether your car is a high-performance vehicle (such as a convertible), or a four-wheel drive (such as an SUV or GMC) can greatly affect not only the rate but also the application of the minimum premium. The latter is the least amount of premium that an insurance provider can legally charge for a particular type of coverage.

You should keep in mind that some insurers also focus solely on low-value cars due to the high volume of business they generate in minimum premium segments. Likewise, some insurance providers focus on competitive pricing products on high-value vehicles. 

4. Your Vehicle’s Value, Specifications, and Use 

Some vehicles in the UAE are imported. In such cases, insurance providers are usually not sure which valuation approach to take, and whether the right parts will be available at the time of a claim. This makes it a risky prospect to insure. This is why most insurers will ask you to verify if your vehicle falls under the ‘GCC specs’ before they take the leap.

Depending on your insurance provider’s experience, whether your vehicle will be used for personal or commercial reasons will also directly affect your premium costs.        

In the UAE, car insurance rates typically range from 1.75% to 4%. This is directly related to the value of your vehicle. The higher the value, the higher the cost of insurance premium.

5. Amount Payable By The Insurer (You)

Also known as ‘a deductible’, this is the amount you, as the insured party, must pay out of pocket before an insurance provider will issue payment for the remainder of the claim. This term may be used to describe one of several types of insurance clauses used by providers as thresholds for policy payment.       

Additionally, a relatively newer development is your history of fines. Some insurance providers analyze your history of fines to evaluate the likelihood of your being in an accident. Some might even reject your application outright if you have a number of fines in your immediate past. 

6. Your Vehicle’s Age and Coverage 

A new car will be relatively more expensive to replace or repair. As a result, more comprehensive insurance coverage will be preferred to protect it against any possible damage(s). In contrast, much older cars might be secured via more affordable insurance rates. 

7. Additional Features and Add-ons

If your car comes with additional safety features, that are more sophisticated than most vehicles, insurance providers may reduce the premium rate. This is because the car will be considered safer to drive.

Further, if a car has expensive add-ons and highly sophisticated features, the premium rate will also be directly affected.

Some insurance providers divide their offerings into different categories, such as Silver, Gold or Platinum. Each category has a different premium rate and is usually focuses on a completely different market segment.       

8. The Scheme You Choose

If your vehicle is a part of a large fleet registered in a single entity’s name, or if you belong to an affinity group, you may see a difference in the rate(s) you are given. Sometimes, an individual vehicle might even receive a lower rate than a fleet of cars.   

9. Your Previous and Current Insurance Provider 

Due to the high level of competition in the insurance market, some potential insurance providers might even reduce their premium rates if your previous or current provider is a direct competitor. They may also be known as doing their job of underwriting well.

With regards to your current insurance provider(s), their performance in the market will directly affect their appetite for risk. If insurers suffer too many losses, they might become conservative (that is, charge higher) with their pricing models.

10. Optional Benefits

If you choose to add agency repair in the third or fourth year after your vehicle registration, you will see a significant surcharge over and above your premium rate. Optional benefits could include personal accident compensation, geographical extensions (such as to all GCC countries) and offroad cover, or hire car cover (which temporarily provides you with another car while your own vehicle is repaired in the workshop after an accident). Any or all of these will impact your insurance premium cost. 

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