What UAE Law Says About Car Insurance Costs and Conditions: A Complete Legal Guide for Motorists in 2025

Renewing car insurance in the UAE can sometimes feel like navigating a maze. You might request quotes from several insurers, only to receive wildly different prices for what appears to be the same level of coverage. Many UAE residents ask: Isn’t car insurance regulated? Why are premiums so different? And what does the law actually say about how much insurers can charge?

To answer these questions, it’s essential to understand how the UAE regulates motor insurance, what the unified policy covers, how premium caps work, and where insurers are allowed to add extra charges. This comprehensive guide breaks down the legal framework in simple, practical terms—so motorists can make informed decisions when renewing or selecting coverage.

1. The Legal Framework Governing Motor Insurance in the UAE

Motor vehicle insurance in the UAE is not left to the free market alone. It is tightly regulated to ensure fairness, consumer protection, and uniformity of coverage. The foundation of these regulations comes from two key Insurance Authority decisions:

1. Insurance Authority Board Decision No. 25 of 2016

This decision introduced the Unified Motor Vehicle Insurance Policy Against Loss and Damage. It includes the standard form, mandatory clauses, coverage areas, responsibilities of the insurer, obligations of the insured, exclusions, and claims-handling procedures.

2. Insurance Authority Board Decision No. 30 of 2016

This decision provided the tariff system for motor vehicle insurance premiums—including the maximum allowable premium rate and the rules insurance companies must follow when calculating motor insurance costs.

Together, these regulations ensure that every insurer operating in the UAE follows a unified set of rules so that consumers are not misled or overcharged.

2. The Mandatory Coverage Every Motor Insurance Policy Must Provide

The Unified Motor Vehicle Insurance Policy applies to everyone equally—regardless of the insurer. So whether your policy comes from a well-established insurance provider or a smaller operator, the base legal requirements remain the same.

Below is a breakdown of what the policy must include:

A. Obligations of the Insurance Company

Under UAE law, insurers must:

• Compensate the insured for damages covered under the policy
• Repair or replace the insured vehicle when the damage is significant
• Provide indemnity for losses arising directly from risks specified in the policy
• Handle claims in accordance with regulated timelines
• Act in good faith and within the policy’s terms

This ensures the insured party receives adequate protection and support in the event of an accident.

B. Obligations of the Insured

The insured person also has legal obligations, including:

• Paying premiums on time
• Taking reasonable precautions to avoid damage
• Notifying the insurer promptly after an accident
• Maintaining proper vehicle ownership and documentation
• Ensuring the driver holds a valid UAE driving licence
• Following the policy conditions to avoid voiding coverage

Failure to comply with these obligations can limit or void coverage.

C. Exclusions in a Standard Motor Policy

Not all incidents are covered. The Unified Policy excludes:

• Indirect or consequential losses (for example, loss of business income if your car is damaged)
• Damage caused by overloading the vehicle
• Accidents occurring with an unlicensed driver
• Accidents taking place outside the geographical limits stated in the policy
• Intentional acts that cause damage
• Mechanical or electrical breakdowns, unless caused by an insured event

These exclusions protect insurers from claims outside the reasonable scope of insurance coverage.

D. Recourse Rights

Insurers are allowed, under certain conditions, to recover amounts paid out in claims if:

• The insured has breached major policy obligations
• Fraud or misrepresentation occurred
• The driver was under the influence of alcohol or drugs
• The vehicle was used for purposes not permitted by the policy

This is known as the insurer’s “right of recourse.”

E. Policy Termination Clauses

The Unified Policy also outlines:

• When a policy can be terminated
• Refund rules
• Notice periods required
• Mutual cancellation terms

This ensures transparency and fairness for both the insurer and the insured.

3. Why Car Insurance Quotes Vary Despite the Unified Policy

A common misunderstanding is that if policies are “unified,” all insurers should quote identical prices. But this is not accurate. While the core coverage is standardized, insurers have flexibility in several areas:

A. Optional Coverage and Riders

Under Clause 5, Chapter One of the Unified Motor Vehicle Insurance Policy:

“The Company and the Insured may agree, using riders in return for an additional premium and within the scope of the terms and conditions herein, that the Company shall insure against the other damages not provided for in this Policy…”

This means insurers may offer extra benefits beyond the basic coverage—for an additional premium. These include:

• Coverage for personal property inside the vehicle
• Coverage for the driver’s own property
• Natural disaster coverage (flooding, sandstorms, etc.)
• Agency repair or non-agency repair
• Coverage outside paved public roads
• Personal accident benefits for the driver and passengers
• Roadside assistance
• Replacement car benefits

Each insurer prices these add-ons differently, which creates variation in quotes.

B. Customer Behavior & Discount Factors

Premiums may also differ due to:

• Driver’s accident history (claims record)
• Vehicle type, age, and condition
• Location of registration
• No-claim discounts
• Driving experience and nationality (within regulated guidelines)

These factors affect pricing—within legal limits.

C. Company Profit Strategy

Some insurers operate on a low-margin, high-volume model, offering cheaper premiums. Others focus on premium service, offering higher-quality repairs, shorter processing times, better replacement car options, and higher customer support levels.

This also leads to varied pricing.

4. Maximum Premium Rates Allowed by UAE Law

Despite all the variations and add-ons, the UAE has clear rules on the maximum premium an insurer can charge for the basic 13-month policy.

According to Insurance Authority Decision No. 30 of 2016, the maximum premium is:

• 5% of the vehicle’s value for saloon cars
• 7% of the vehicle’s value for four-wheel-drive vehicles

This means insurers cannot exceed these percentages when setting the base premium.

For example:

• If a saloon car is valued at AED 60,000, the maximum legal premium is AED 3,000.
• If a 4WD vehicle is valued at AED 120,000, the maximum legal premium is AED 8,400.

These caps ensure fairness and prevent insurers from overcharging.

5. Additional Premiums Must Be Within the Scope of the Policy

Insurers are allowed to charge additional premiums only if:

• They are tied to a specific add-on or rider
• The add-on is documented in writing
• The insured agrees to the additional charge
• The terms comply with the Unified Policy

This means insurers cannot arbitrarily inflate premiums—they must justify the price legally.

6. Understanding the 13-Month Policy Requirement

Many motorists wonder why UAE policies are 13 months instead of 12. The extra month accounts for the grace period required for vehicle registration renewal. The insurance must cover the vehicle throughout this period to ensure compliance with UAE traffic laws.

7. Practical Tips for Motorists Renewing Insurance

To ensure you’re choosing the right policy at the right price, consider the following:

>> Compare the base policy, not just the premium

Make sure you compare similar coverage levels and note any additional riders.

>> Check whether agency repair is included

This is one of the biggest price differentiators.

>> Review add-on benefits carefully

Some may be worthwhile (like personal accident cover or natural disaster protection), while others may not apply to your usage.

>> Ask for the tariff calculation

Insurers must provide transparency on how the premium was calculated.

>> Know your legal rights

If you believe you’ve been overcharged or misled, you can file a complaint with:

• The insurer
• The Central Bank of the UAE (Insurance Division)
• Consumer Protection authorities

8. Final Thoughts: What Motorists Should Take Away

The UAE’s motor insurance system is designed to balance:

• Consumer protection
• Fair pricing
• Consistent coverage standards
• Transparency in insurance practices

While insurers are allowed flexibility in offering add-ons and premium services, they must operate within the legal framework of the Unified Motor Vehicle Insurance Policy and the Tariff Decision.

Understanding these regulations helps motorists:

• Avoid being overcharged
• Choose the right coverage
• Know exactly what their policy includes
• Protect themselves legally and financially

If you have concerns about your insurance policy, premium calculations, claim refusal, or exclusions, Ahmad Abdulla Ahli Advocates & Legal Consultants can assist with legal review, dispute resolution, and regulatory guidance tailored to your situation.