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How to Calculate Your Car Insurance Premium

Written by Sahar

How to Calculate Your Car Insurance Premium

There are many factors that compound to make up the car insurance premium you end up paying. It is no secret that car insurance in Dubai is not only mandatory but a little on the expensive side. Calculating premium, though, is not that hard.

Two policies dominate the field – Comprehensive Coverage, though the more expensive of the two, essentially covers all costs that can occur during vehicle use. Third-Party Liability Coverage only covers a portion of the car and any damages you might have to pay to a third party after an accident.

It does not cover the cost of damage that your car incurs, which can be a heavy blow to the bank account in cases of sudden collisions.

Depending on the coverage you opt for, you can come up with an approximate figure if you keep the following factors in mind.

What is Car Insurance Premium?

The car insurance premium is the amount drivers pay as their car’s insurance amount regularly. Either monthly or after 6 months depending upon the insurance policy they buy. 

Factors affecting Car Insurance Premium Calculation:

Age and Experience of Driver

Suffice it to say that the more experienced a driver is, the more confident the car insurance companies are in managing the busy roads of Dubai. Part of the initial paperwork is any information about the drivers using the insured car.

If one of the drivers is young, between the ages of twenty to twenty-five, and has very little experience on the road, then the premium is likely to go up because the risks of damage are greater.

Accidents and Fines in Driving History

Responsible drivers will get better car insurance premium options because they are less risky. They are also less likely to request large and frequent claims.

Buyers with a driving history dotted with fines, warnings, and accidents can expect to pay higher premiums because of the risk they carry with them. The only way to counter this is to drive responsibly and slowly clear your history of vehicular misdemeanors.

On the other hand, drivers with excellent records get benefits. If you’re a previous policyholder and have never made any claims, you are eligible for the No-Claims discount. This lowers your premium considerably.

The Car Itself

Another factor that plays a very important role in calculating the premium for car insurance in Dubai is the make and model of your car. Newer vehicles are expensive to replace and repair, so the car insurance premium goes up. Older models enjoy a lower premium. Similarly, luxury cars are expensive to cover.

Vehicle Features

New and luxury cars may be expensive to insure, but if they come with special safety features, they shave a sum off your car insurance premium. These vehicles are deemed safer to drive and pose less risk of accidents, and damage, hence fewer claims.

Opting for Agency or Non-Agency Repairs

Car insurance policies usually cover this option, but it is always prudent to check. Agency repair by the official car dealers is expensive and will add to your car insurance premium. Yet if you opt for the non-agency repair, you can calculate a lower premium. This factor depends on what you want and the kind of expense you’re comfortable with.

Choice of Deductibles

Deductibles are the amount the buyer agrees to pay in case of damage due to an accident caused by them. The equation is simple, the higher the deductible, the lower the premium, and vice-versa. Opt for a higher deductible if you’re very careful when driving will only make sense.

But it is still a risk that can cost you an arm and a leg when you least expect it. Those with a history of accidents would do better to opt for lower deductibles and a high premium.

Extra Features

Calculating premium can be as simple as opting for the basic coverage and being done with it. But when you look at the extra features you can add to your policy, many of them make sense. 24/7 roadside assistance, off-road insurance, and agency repair are a few examples.

This can add exponentially to your car insurance premium, so you should tally what you want with your budget.

It’s not very hard to calculate your car insurance premium if you know exactly what you want. Incidentally, websites like Buy Any Insurance are great sources where you can calculate premium without having to interact with a salesperson. Buy Any Insurance can give you a fair idea of what quotes you can expect for the features of your choice.

Car insurance comparison is made easy through this medium and can broaden your horizon of what you can afford in your budget. It is also a great place to ask any questions or make enquires about car insurance in Dubai as their team is always on hand to help out.

Step Wise Procedure to Calculate Car Insurance Premium:

The car insurance policy prints we all have contains a lot of factors, including Terms and Conditions, Exclusion, and special cases. We all have been told an amount upfront, but we are never told how this amount is calculated!

When calculating the car insurance premium amount, the general rule is that if your car costs more than three hundred thousand AED, the insurance will be 2.75% of your car’s original value. If your car cost between 100,000 AED-300,000 AED, the insurance amount will be 3% of the car’s original value. However, if the car’s worth is less than 100,000, the insurance amount will be 3.25% of the car’s original value. 

Furthermore, the formula that is generally used to calculate the car insurance premium:

Car Insurance Premium= (IDV Premium rates + add-on rates) – (no claim bonus)

Details Required for Calculating Car Insurance Cost: 

Following are the important key factors that insurance companies consider while calculating the car insurance premium: 

  • Your Age
  • Your Experience
  • Medical History
  • Life History
  • Your Credit Score
  • Driving History Your Car’s Make and Model

Car Insurance Premium Calculation FAQ’s

Do car insurance premiums increase every year?

Yes! On average, insurance plans are subjected to an increase every year across the car insurance industry. 

How to calculate car insurance premium?

Formula to get OD premium is: Own damage premium= IDV * [Premium Rate (decided by insurer)] + [Add-Ons (eg. bonus coverage)] – [Discount & benefits (no claim bonus, theft discount, etc.)]

Is Dubai car insurance expensive? 

Annually car insurance in Dubai can cost you 1.25% to 3% of the car’s original value.

How is the basic premium calculated?

The basic premium is calculated by multiplying the basic premium factor by the standard premium. 

How is the monthly premium calculated?

The premium is the rate of the number of units you have purchased and the annual amount the customer pays. 

How is car insurance premium calculated in UAE?

The car insurance premium is calculated using the formula:

Car Insurance Premium= (IDV Premium rates + add-on rates) – (no claim bonus)

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    Originally published Sep 26, 2020 18:27:00 PM, updated Sep 15, 2022

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