Motor Insurance Regulatory Q & A

Motor Insurance in Saudi Arabia
  

7-      What is the compulsory motor insurance policy?

Compulsory insurance policy covers the damages caused to individuals and property by your vehicle. This policy does not cover the damages afflicting you or your vehicle when driving. For example, when an accident takes place and you are 100% the cause, the insurance company will pay for all the damages made by you, but will not pay you any compensation for damages afflicting you or your vehicle.

8-      What is the comprehensive motor insurance policy?

Comprehensive insurance policies covers both the insurance company’s liability for the insured’s car (covers the vehicle against fire, theft, and incidental accidents) and the insured’s liability towards a third party (property and individuals). For example, when two vehicles have an accident, the comprehensive insurance policy covers all damages caused by or afflicted on you. The company shall pay all the costs for repairing your car, repairing and compensating all the damages of the third party that you caused and are responsible for.

The comprehensive motor insurance program can be expanded for an additional premium where it covers the following:

•  Renting an alternative vehicle for the insured while the damaged one is being repaired
•  Roadside assistance service
•  Repairing broken-down vehicle at the dealer or a local garage

9-      What are the things that you should pay attention to when purchasing a comprehensive motor insurance policy?

§  Limits of Coverage:

The amount of coverage stated in the policy or the vehicle’s market value at the time of the accident, whichever is lower, represents the insurance company’s maximum liability for compensation. Make sure that you report the actual value of your vehicle to the company when insuring it, and at each renewal of insurance policy without addition or diminution because the insurance policy is a compensation policy not an enrichment one.

§  Percentage of Depreciation:

The idea of depreciation applied to the object subject of insurance refers basically to the principle of compensation which aims at restoring the insured to his same financial position prior to the loss occurrence. This method is used widely by insurance companies as a means to compensate for the actual value of the damage resulting from the covered loss, taking into consideration the presumed lifecycle of depreciated spare parts. Example: if a car had an accident causing it to be totally wrecked after six months of insurance, and it was worth SR 100,000 upon the purchase of the insurance policy, the insurance company will not indemnify the insured for the whole amount, but it shall deduct the amount of depreciation of the car for six months.

§  No Claims Discount (NCD):

Some insurance companies offer the insured (vehicle owner) what is called “no claim discount” by which they reduce the insurance premium for next year due to having a claim-free and accident-free record over the previous insurance year. This is to encourage drivers to avoid traffic accidents. On the other hand, some companies raise the insurance premium for the new insurance year if the insured submitted a claim during the previous year.

10-  What are the documents supporting the claim in motor insurance?

All documents proving and supporting the fact that the person insured was driving the vehicle driver when the accident occurred, the insurance coverage validity and the circumstances of the incidence from which the claim resulted. Supporting documents also include the accident report from the traffic police department and any other original documents the company might require, such as:

• Driving license
• Vehicle registration card
• Insurance policy

11-  What are the exceptions of an insurance policy?

It is necessary to be aware of the cases where the insurance company is not responsible for indemnifying you for the damage that might be incurred by your car due to an accident. They are included in the policy under “Exceptions” or “Exceptions from the coverage limits” or “General exceptions”. Example:

• Catastrophe risks
• Risks resulting from driving a car by a person under the age of 21