How Does Car Insurance Work in the UAE?

Last updated on : 16 May 2024
4 min read

Car insurance is super important if you own a car in the United Arab Emirates (UAE). It's not just a choice – it's the law! This insurance stuff is a big deal for both local folks and people from other countries living here. So, let's break down how car insurance works in the UAE, and what you need to know.

Must-have Insurance

First off, having car insurance is a must in the UAE. You can't just skip it. It's a legal rule. The basic, must-have coverage is called "Third-Party Liability Insurance." This is the minimum you need, and it helps pay for things like damage to other people's cars or injuries caused by your car.

Extra Protection

Now, some drivers want more protection. So, they go for something called "Comprehensive Coverage." This covers more stuff, like if your car gets damaged in an accident, stolen, catches fire, or faces a natural disaster. It also takes care of medical expenses for you and your passengers if something goes wrong.

How Does Conventional Car Insurance Work Premium Collection and Claims Process

Conventional car insurance in the UAE operates on a system where premiums collected from policyholders form a pool of funds that insurance companies use to settle claims. Premiums are typically paid annually, semi-annually, or monthly, depending on the policyholder's preference. Once the premiums are collected, insurance companies leverage actuarial calculations to assess risks and determine appropriate premium rates. The pool of collected premiums serves as a financial reserve from which claims are paid out. In the event of an accident or covered loss, policyholders can initiate the claims process by contacting their insurance provider. The insurer then reviews the details of the claim, assesses the damage or loss, and disburses funds from the pooled premiums to cover the cost of repairs, medical expenses, or other covered benefits.

Takaful Car Insurance Process

Takaful, an Islamic alternative to conventional insurance, is gaining popularity in the UAE. The Takaful car insurance process aligns with Islamic principles, emphasizing mutual cooperation and shared responsibility among participants. Instead of premiums, participants contribute to a Takaful fund, and when a member faces a loss or damage, the funds are utilized to provide financial support. Takaful operates on the concept of "Tabarru," which represents a voluntary donation made by participants to the mutual fund. In the context of car insurance, if a participant experiences a covered event, the Takaful fund is used to compensate for the losses incurred. The Takaful model promotes community welfare and risk-sharing, aligning with Islamic finance principles while offering a Sharia-compliant alternative to conventional insurance. At, you can get both conventional and Takaful insurance options for your car. 

How Does a Car Insurance Claim Work? 

If you do have a problem – like an accident – there's a process. You need to tell your insurance company right away and follow claim process rules. If you bought your insurance from Shory, you could initiate your claim directly from us and there's no need to contact the provider. You may need things like a police report, pictures of the accident, or estimates for repairs. The faster and smoother you do this; the quicker things get sorted out.


In conclusion, car insurance in the UAE operates through two main models: conventional insurance and takaful insurance. Conventional insurance, widely practiced, involves policyholders paying premiums to insurance companies, which then manage and invest the funds to cover claims and operational costs. On the other hand, takaful insurance follows Islamic principles, emphasizing mutual cooperation and risk-sharing among participants. In takaful, policyholders contribute to a common pool to support those who suffer losses, fostering a sense of community and ethical financial practices. Both systems aim to provide financial protection and adhere to legal requirements. Whether one opts for the traditional approach or embraces the principles of takaful, understanding these insurance models is crucial for individuals seeking coverage tailored to their preferences and values in the diverse landscape of the UAE.

Disclaimer: Shory aims to present accurate and up to date information, however we take no responsibility or liability for any errors or omissions in the content