General Insurance
Chapter One
Car insurance
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Car insurance
Introduction: Car Insurance:
The number of cars has increased significantly in recent times due to the economic
boom that has swept across all sectors. This has been facilitated by the boom in
installment sales and the significant payment facilities. Cars have become a
manifestation of modern civilization, especially after the tangible improvement
in the level of income of individuals. Cars are also an indispensable economic
and social necessity, as they are the most important means of internal and cross-
border transportation, whether for transporting passengers or goods. They are
also considered the most important means of private transportation.
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Car insurance
The continuous increase in the number of cars, in addition to the poor roads,
scarcity of lanes, entrances, bridges and tunnels, in addition to weather factors,
the wrong behavior of drivers and pedestrians, disregard for traffic rules and
leniency in issuing driving licenses, has led to a significant increase in the
number of accidents and the huge amount of losses resulting from them. This
has made this type of accident a matter of interest to those working in the
insurance sector and other related sectors, as the damages resulting from car
accidents are not limited only to their owners, but extend to include other road
users, who may suffer damage to their bodies or property.
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Car insurance
Therefore, many countries have enacted laws regulating traffic flow, with the goal
of ensuring the safety of all citizens. This requires Car owners to insure their
Cars to cover their civil liability towards third parties. This insurance also plays a
social role in providing protection to those affected, especially since the person
causing the damage is often unable to pay compensation from their own pocket.
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Car insurance
Car Accident Risks:
The risks resulting from car accidents can be classified into three groups:
1- Civil liability risks towards third parties, whether personal or financial.
2- Risks to the Cars themselves, such as damage or loss.
3- Accidents and injuries to the driver or passengers.
Insurance companies cover all motorized and self-propelled Cars. The most
important of these coverages are:1- Fire and theft coverage only, used to insure
out-of-service Cars.
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Car insurance
2- Liability coverage, which covers civil liability towards third parties.
3- Fire, theft, and civil liability coverage.
4- Comprehensive insurance, which covers, in addition to civil liability, damage to
the Car itself resulting from loss or damage.
We will only mention the most common types, which are compulsory insurance and
comprehensive insurance.
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Car insurance
First: "Compulsory" civil liability insurance or third-party car
insurance:
This insurance provides protection for the injured party, compensating them for
damages incurred due to the Car owner's fault, and guarantees compensation
from the insurance company, regardless of the financial capacity of the person
causing the damage.
This insurance aims to promote the idea of safety, which encourages individuals to
show solidarity and cooperation with others who are exposed to the same risk,
thus ensuring safety for themselves and others. Most countries have made it
mandatory, as Car use is not permitted unless an insurance policy covering the
liability arising from its use is obtained.
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Car insurance
Second, comprehensive car insurance:
This is optional coverage that covers damage to the Car due to loss or damage, in
addition to damage to the body or property of others. The insurance premium is
determined based on the value of the Car, calculated as a percentage of the
insurance amount. Prices are often agreed upon by an alliance comprising all
insurance companies. Insurance oversight bodies may impose certain controls to
determine prices. A comprehensive insurance policy consists of two parts:
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Car insurance
Section One: Loss or Damage:
The company will compensate the insured for loss or damage to any Car listed in
the table attached to the policy if the loss or damage results from:
1. Accidental collision or rollover.
2. Collision or rollover resulting from mechanical failure, wear and tear on Car
parts, or tire bursting.
3. Hostile action by any person not living with or employed by the insured.
4. Fire, theft, internal or external explosion, or lightning.
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Car insurance
5. Transportation of the Car by land or sea, provided that the company is notified
prior to transportation.
6. Damage to the Car resulting from falling objects.
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Car insurance
Loss Settlement Rules:
The company has the option to repair the Car by restoring it to its previous
condition, replace all or any of its parts, accessories, or spare parts, or pay in
cash the value of the loss or damage resulting from an accident covered under
the terms and conditions of this policy.
Loss Settlement in the Event of Partial Damage:
The maximum compensation value in the event of a partial loss is the restoration of
the damaged part to its condition prior to the moment of the accident.
This is equivalent to the cost of labor plus the value of spare parts after deducting
the depreciation value. The depreciation rate is calculated according to the
depreciation clause stated in the policy.
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Car insurance
Loss Settlement in the Event of Total Damage:
The company's maximum liability in the event of a total loss will not exceed the
market value of the Car at the time of the accident, provided that the
compensation amount does not exceed the insured value of the Car. If the
company decides to compensate the insured with the insured value, the
depreciation value will be deducted according to the depreciation clause stated
in the policy. The company reserves the right to consider the Car a total loss if it
deems it uneconomical to repair.
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Car insurance
When compensation for total loss of a Car is payable, the entire annual
subscription for that Car is the right of the company. Furthermore, the insured is
obligated to transfer ownership of the Car to the company, provided that in the
event of the Car being stolen, the insured will be compensated within 30 days
from the date of reporting the Car to the police.
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Car insurance
Depreciation:
In the event of loss or damage to the insured Car, the company makes the following
deductions for depreciation:
For partial losses:
For lost or damaged spare parts, if they are replaced with new ones or the value of
the new parts is paid in cash, the deduction rate is as follows:
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Car age Discount rate
Less than a year 5%
One year to less than two years 10%
Two to less than three years 15%
Three years to less than four years 20%
Four years to less than five years 25%
five years or older 30%
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Car insurance
For tires, the discount is 25% for each year or part thereof of their lifespan, with a
maximum of 50% of their replacement value. The depreciation requirement does
not apply to windshields, rear windows, and door windows.
Regarding Total Loss:
If a claim is settled based on the total loss of the insured Car, the company's
liability will not exceed the lesser of the following two amounts:
1/ The estimated value of the Car by the insured, less 2% for each month or part
thereof that has elapsed since the inception of the policy.
2/ The reasonable market value of the Car at the time of the loss or damage.
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Car insurance
Deductible:
In the event of loss or damage to the insured car, the company applies the
deductible amount included in the policy schedule to all claims. The insured is
exempt from paying the deductible provided that a third party was involved in
the accident, that the third party was 100% responsible for the accident, and that
the third party's information was known and documented in the traffic report, so
that the third party was neither a fugitive nor unknown.
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Car insurance
Maintenance, Transportation, and Medical Expenses:
The company will pay the reasonable cost of transporting the damaged car as a
result of an accident covered by the policy to a safe place or to a repair shop, as
well as appropriate emergency medical expenses within the limits of the medical
expenses specified in the policy schedule.
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Car insurance
Example1:
A person insured his 2014 model car with an insurance company for SAR 750,000
at an insurance rate of 3% for the period from January 1, 2018, to December 31,
2018. The car was involved in an accident on July 5, 2018, resulting in a loss. The
details of the accident were:
1/ Damage to the front of the car was estimated at SAR 10,000.
2/ Assuming the loss in the example above was total.
Calculate the compensation value if the company decides to compensate the
insured based on the insurance amount.
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Car insurance
Solution:
1. Damage to the front of the car was estimated at 10,000 riyals.
Since the car is less than 5 years old, we deduct 25%.
Discount value = 25% * 10,000 = 2,500 riyals.
Compensation = 1000 - 2,500 = 7,500 riyals.
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Car insurance
If the claim is settled based on the total loss of the insured car, the company's
liability will not exceed the lesser of the following two amounts:
1/ The estimated value of the car by the insured, less 2% for each month or part
thereof that has elapsed since the inception of the policy.
2/ The reasonable market value of the car at the time of the loss or damage.
Calculate the compensation value if the company decides to compensate the
insured based on the insurance amount
Deduction = 750,000 * 14% = 105,000
Compensation = 750,000 - 105,000 = 645,000
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Car insurance
Exercise:
1/ A person insured his 2015 model car, valued at 30,000 riyals, with
comprehensive insurance from Naseej Insurance Company at a 3% rate for the
period from May 6, 2015, for a period of one year. On August 3, 2015, the vehicle
was involved in an accident, resulting in the following losses:
(a) Damage to the left-side doors costing 7,000 riyals.
(b) Damage to the two left-side tires cost 200 riyals each.
(c) Damage to the glass of the damaged doors requires 125 riyals to be replaced.
Required: Calculate the insured's share of the compensation.
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2- Ziad insured his car, valued at SAR 25,000, with comprehensive insurance from
Ruwa Insurance Company. His car was involved in an accident resulting in a total
loss. The value of the car at the time of the accident was SAR 23,[Link] you know
that the above car insurance policy was issued on April 1, 2019, for a period of
one year, and that the accident occurred on August 3, 2019, calculate the
compensation Ziad would be entitled to in the following cases:
1. If the insurance company decides to compensate Ziad based on the market value
of the car at the time of the accident.
2. If the insurance company decides to compensate Ziad based on the value of the
insurance amount.
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Car insurance
Section Two: civil Liability Insurance:
1- The company shall pay the compensation awarded to claimants for any bodily
injury, whether fatal or non-fatal, arising from the use of the car. This insurance
does not cover injury or death to the insured, the person driving the car, anyone
working for the insured, or anyone living with the insured in their home.
2- The company shall pay the compensation awarded, pursuant to a court decision,
to the claimant for any damage to the property of a third party. The insurance
does not cover the property of the insured or property under their management
or guardianship, nor does it cover the property of any person living with the
insured or the property of anyone driving their car.
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Car insurance
3- The company shall pay the legal expenses incurred, with the company's approval,
to defend the insured in any lawsuit related to death or damage requiring
compensation due to the insured's liability to a third party.
Coverage Limits:
In the event of an accident resulting in compensation under the provisions of this
policy, the company's maximum liability in a single incident and during the
policy period for bodily injury, including estimated blood money for injuries,
medical expenses, and material damages, shall not exceed a total amount of
10,000,000 riyals (ten million riyals), as the company's maximum liability.
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Car insurance
Non-claims against third parties:
The company may not claim against third parties its non-liability for compensation
under this policy due to the insured's or driver's commission of any violation,
whether the violation occurred before or after the accident, or due to their
failure to comply with the provisions of this policy, without prejudice to the
company's right to recourse against the insured or driver after payment to third
parties, by all legal means, if such recourse is justified.
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Cases excluded from coverage by the civil liability insurance policy:
1- Accidents occurring outside the geographical area agreed upon in the policy.
2- Damage to the car if used for purposes other than those intended.
3- Driving under the influence of drugs or alcohol.
4- Use of the car by a person without a driver's license.
5- Loss, damage, or loss of personal belongings or car accessories.
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Car insurance
6- Accidents affecting the insured personally, his family members, or those working
in his service, resulting from a third party. Accidents affecting the driver or
passengers inside the car are not covered unless explicitly stated in the policy.
7- Damage or harm to the car resulting from loading or unloading cargo.
8- Consequential and indirect losses resulting from the insured being deprived of
the use of the car due to an accident, fire, theft, or any other cause.
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Car insurance
9- Loss, damage, direct or indirect liability related remotely or proximately, such as
storms, floods, rain, earthquakes, war, or civil unrest. The insured must prove
that the damage is not related to or related to these hazards, otherwise he will
forfeit his right to compensation
10- Corrosion, mechanical or electrical failure, damage, or breakage of any part of
the car.
11- Damage resulting from overloading or excessive use of the car.
12- Tire damage due to use or poor road conditions.
13- Loss or damage resulting from accidents that occur to the car while it is being
guarded or maintained by the persons to whom it was entrusted for guarding or
maintenance.
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Car insurance
General Policy Conditions:
1- This policy shall not become effective until the insured pays the premium.
2- The company shall not be obligated to pay compensation if the insured provides
false information.
3- The insured must notify the company within 48 hours of an accident.
4- No compensation offer may be submitted or accepted by the insured without the
company's approval.
5- The insured must maintain the car and not leave it unattended during an
accident.
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Car insurance
6- The insurance is considered void if the car's ownership is changed without the
company's consent.
7- The company may cancel the policy after notifying the insured in writing. The
insured may also request cancellation for valid reasons.
8- If there is another insurance policy for the same car, the company will pay its
proportionate share of the compensation in the event of an accident.
9- In the event of a dispute over the policy, the dispute will be resolved by
arbitrators, with each party appointing one arbitrator. The arbitrators may select
a third arbitrator.
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Car insurance
10- Insurance under this policy is based on a cooperative basis in accordance with
the provisions of Islamic Sharia.
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Additional Extensions:
At the beginning of the insurance coverage or during the policy's term and within
the limits of the terms and conditions contained in the agreement, the company
may, upon the insured's written request, expand the insurance coverage to
include compensation for damages other than those stipulated in the policy,
provided that the insured pays the required additional premium.
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Car insurance
Expansion of the provision of a rental replacement car (for private
cars):
In the event that the insurance coverage is expanded to include this benefit,
the company will reimburse the insured for the actual expenses incurred to rent
a replacement car, provided that the compensation amount does not exceed the
maximum rental limit for the replacement car specified in the policy schedule for
the period following the date of the accident, as follows:
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Car insurance
1/ If the car is undriveable due to the accident, the company will reimburse the
insured for the rental costs of a replacement car from the time of the accident
until the car's repair is completed.
2/ If the car is drivable after the accident, the compensation will be effective from
the date the car is delivered to the workshop until the repair is completed.
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Car insurance
Personal Accident Extension:
If the insured requests the addition of this extension, for example, insurance
coverage for the driver or for the driver and passengers, the company will pay
appropriate compensation in accordance with the table and conditions set forth
below for injuries described in the table below, which the insured, the authorized
driver, or any of the passengers declared as a direct result of an accident to the
insured car due to violent and accidental factors that lead, and are independent
of any other cause, within fifty-two consecutive weeks from the date of
occurrence to:
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Car insurance
Statement Compensation amount in riyals
death 100,000
Total and irreversible loss of vision in both eyes 100,000
Amputation loss resulting from amputation at or above the wrist or 100,000
ankle of both hands or both feet
Amputation loss resulting from amputation at or above the wrist or 50,000
ankle of one of the hands or one of the feet
Total and irreversible loss of vision in one eye 50,000
Total and permanent inability to perform any work or profession 100,000
whatsoever
Expenses incurred for medical and surgical treatment 25,000
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Car insurance
To implement the above schedule, note the following:
The total compensation payable to a single person for each accident and for the
total compensation will not exceed 100,000 (one hundred thousand riyals).The
company will not be obligated to pay compensation if the accident is a direct or
indirect result of any criminal or aggressive act by the insured or authorized
driver.
Compensation is limited only to injuries sustained by persons inside the car at the
time of the accident.
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Car insurance
If the number of persons inside the car, including the driver, at the time of the
accident exceeds the passenger capacity specified in the policy schedule, the
compensation payable will be proportionally reduced accordingly. However, this
compensation is not payable if the car carries passengers exceeding the car's
permitted capacity and it is proven that the accident occurred due to this excess.
Compensation is only payable when the disability has lasted for fifty-two
consecutive weeks and is certified by a qualified physician appointed by the
insurance company.
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Car insurance
Example 2:
Noura has a comprehensive insurance policy that began on January 10, 2018, for a
period of one year. If you know that:(a) The car model is 2016 and the car's
insurance value is SAR 35,000, for which she paid a 3% insurance premium.
Noura was involved in an accident on October 13, 2018, resulting in:
(a) Damage to the front of her car amounting to SAR 3,200.
(b) Her companion suffered a fractured left hand, the cost of which was SAR 400.
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Car insurance
(c) A front tire burst, the cost of which was SAR 150, noting that Noura did not
replace the tires after purchasing the car.
(d) The other party's car was damaged, and the damage to the car was estimated at
SAR 9,700. One of the passengers in the other party's car also suffered a fractured
leg, requiring treatment and hospitalization for SAR 10,000.
You need to calculate how much the insurance company will pay in this accident if
you know that Noura does not have additional coverage (with an additional
premium).
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Car insurance
Solution:
A/ Front-end damage worth 3,200 riyals:
Since the car is less than three years old, we deduct 15%.Compensation = 3,200 –
(3,200 x 0.15) = 2,720 riyals.
B/ Injury to a passenger:The company is not obligated due to the lack of additional
coverage.
C/ Tire blowout:150 – (150 x 0.75) = 37.5 riyals.
D/ Third-party damages are paid in full (9,700 + 10,000) = 19,700 riyals.
The amount the company will pay to the insured:2,720 + 37.5 + 19,700 = 22,457.5
riyals.
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Car insurance
Exercise:
Noura has a comprehensive car insurance policy that started on January 10,
2018, for a period of one year. If you know that the car model is 2015, the
value of the car when insured was 35,000, she paid a 3% insurance premium,
and that she was involved in an accident on October 13, 2018, which resulted
in the injury of a passenger in the other party's car. The passenger's treatment
in a private hospital before he died from the injuries cost 20,000 riyals. If you
know that Noura had a personal accident extension and that her sister, who
was in the car with her, died, calculate the compensation.
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Car insurance
Cancellation:
Company has the option to cancel this policy by sending a thirty-day cancellation
notice to the Insured by registered delivery to the Company's last known address.
In this case, the Company shall be obligated to pay the proportional portion of
the subscription (premium) for the remaining insurance period after the
cancellation date.
The Company also has the right to cancel this policy if the Insured fails to pay the
subscription by the due date specified by the Company and as specified in the
policy schedule.
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Car insurance
The insured has the option to cancel the policy upon 15 days’ notice. The company
has the right to retain the subscription for the period during which the policy
was valid before its cancellation. The company will return the remaining portion
of the subscription to the insured according to the attached schedule. The
subscription will not be payable for cars declared as a total loss. For policies with
only partial losses, the maximum amount recoverable will be the total amount
recoverable less any paid claims.
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Car insurance
The policy will only be cancelled after the insured confirms that the car is insured
elsewhere, at least for third-party liability insurance coverage only, or in the
event that the car registration is cancelled by the relevant regulatory authorities,
or a new insurance policy is issued due to changes in the car data or transfer of
ownership of the insured car.
The following table shows the refund percentage due according to the period of
validity of the policy:
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Car insurance
Document validity period before The proportional portion of the
cancellation subscription that the company is
obligated to pay to the insured
1-7 87.5%
8-30 75%
31-60 60%
61-90 50%
91-120 45%
121-150 40%
151-180 35%
181-210 25%
211-240 20%
241-270 10%
271-365 0%
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Car insurance
Example 3:
The following table shows the data for a car: From the table below, calculate the
premium the insured is entitled to.
car value Insurance price Insurance start Date of document cancellation request
date
40000 4% 2019/3/22 2019/5/1
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Solution:
Insurance premium = insurance amount x insurance price
Insurance premium paid = 0.04 x 40,000 = 1,600 riyals
Since the policy has been in effect for (41) days since its issuance date, the refund
rate of the paid premium is 60%.
Amount to be refunded to the insured =0.6 x 1,600 = 960 riyals
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Car insurance
Exercise:
Adel insured his car, valued at 100,000 riyals, with comprehensive
insurance from Wafa Insurance Company, paying a premium of 4,000
riyals. His car was involved in an accident, resulting in a loss of 1,500
riyals, which was paid in full. Sixty days after the policy was in effect, he
requested to cancel it. Calculate the refund amount.
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Car insurance contracting procedures
First, the insurance application:
Most countries do not use an insurance application for compulsory car insurance.
Instead, the policy is written directly and its data is taken from the car's
registration. However, for comprehensive insurance, this application must be
used.
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The most important questions asked in car insurance applications of various types
are as follows:
1- Name of the insurance applicant:
The name of the insurance applicant is not sufficient; sometimes, their insurance
status is also stated to determine the insurance interest of the contractor:
whether they are the owner of the car, its lessee, a purchaser of the car on credit,
or a deposit with them (garage owners).
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2- Insurance applicant's address:
The degree of risk varies from one city to another and from one region to another.
This information can be used to estimate the degree of risk.
3- Insurance applicant's profession or work:
This information is of great importance, as the degree of risk the applicant is
exposed to depends on the job. An additional premium may be determined to
address additional risks at work.
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4- The age of the insurance applicant:
Age has a significant impact. If the insured is young, he or she may be indifferent,
and in this case, the risk will not be accepted unless he or she covers a certain
amount for each accident (the deductible clause). The insurance applicant may
also be elderly, and therefore, the risk of accidents is also higher, which
necessitates the inclusion of a deductible clause.
5- The health or physical condition of the applicant:
As for the health or physical condition of the insurance applicant, the insurance
applicant is usually asked to clarify whether he or she, the person authorized to
drive the car, suffers from an illness, is visually or hearing impaired, or has a
physical disability, providing details.
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6- Information about the car to be insured:
The purpose of this information is to study the car's condition and key data, such
as the year of manufacture, license plate number, chassis number, engine
number, engine cylinder capacity, number of seats, including the driver, the
estimated value of the car, whether the car is new or used, and the purpose of
the car's use (personal use, public transport car, taxi, freight car).
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7- car Ownership:
Is the car you are insuring owned and registered in your name to establish the
principle of insurable interest?
8- Previous car Accidents:
Details of accidents that occurred during the previous years for any car you own or
use, the number of accidents, and the amount of compensation paid.
9- Current and Previous Insurance:
Are you currently insured on the car to be insured to apply the principle of
insurance participation in the event of an accident?
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10- Deductible and No Claims Discount:
The insurance application asks whether the insured is willing to bear a portion of
the amount the company pays for each accident. This allows the premium to be
determined. The insurance premium is also reduced for the insured if there are
no claims in the past year as a reward and incentive to maintain an accident-free
record. This has significant implications for society as a whole.
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11- Conditions for previous insurances:
This is to determine whether a request submitted by any insurance company was
rejected or whether an insurer requested an additional premium.
12- Declaration and pledge:
The insurance service applicant must sign at the end of the application the
declaration by which he agrees that all information contained in the application
is correct and consistent with reality.
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Second: car Inspection:
After submitting the insurance application, the company inspects the car to assess
its condition and value so that the premium can be estimated.
This inspection is called the pre-policy inspection and is usually limited to its
outward appearance.
The inspection usually takes place at the company's headquarters, or the inspector
travels to the car's location at the customer's request.
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Third: Issuing the Policy:
After submitting the insurance application and the company conducting an
inspection by one of its engineers, the company takes one of three options:
either accepting the insurance according to the regular tariff, accepting it under
special conditions at an additional price, or not accepting it.
If the insurance is accepted, the policy is issued after paying the insurance
premium. The policy contains five parts:Introduction, Contractual Text,
Exceptions, General Conditions, and Table.
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THANKS
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