When buying or renting real estate in Dubai, insurance-related questions often arise. Are there any differences in this procedure in the UAE? What is covered by the insurance, and what is not? How to find a suitable program? How to protect one’s savings when investing in an off-plan property? And finally, is it mandatory to insure a property in the UAE, and who is legally obliged to do it: the owner or the tenant? As in most countries of the world, housing insurance in the UAE has two components: 

<ul><li><em>Building/premises insurance</em> (covers internal and external damage to structural elements of the building);</li><li><em>Insurance for personal belongings inside the house</em> (covers damage or loss of every item in the premises).</li></ul>

Depending on the specific situation, the insurance company may combine them into one program or offer to purchase several different certificates of insurance. The type of property plays a major role in building or premises insurance. If one buys an apartment in a residential building, it should already be insured. Under the laws of the United Arab Emirates, the owner of a residential complex or the master developer are obliged to insure the entire building. But if one buys a villa or any private house, it is their responsibility to isure the property. However, the law does not require homeowners to insure private housing, since it is a personal choice. The decision whether to insure personal belongings stored in the house is also made voluntarily. Although the United Arab Emirates is known as one of the safest countries where natural disasters or crimes are rare, the risk of accidents always remains. One cannot rule out fires, water main breakdown and all kinds of unexpected and unpleasant events. In May 2020, the Abbco Tower, a 50-storey tower in Sharjah, was set on fire, and the Torch Tower in Dubai, due to the irresponsible behaviour of its occupants, was on fire three times. In such situations, the right insurance program allows the property owners to get full compensation. Insurance of real estate indirectly includes general liability insurance. If there is a fire in one’s apartment or if their plumbing breaks through so other apartments have been damaged, the neighbors can then demand a compensation from tens to hundreds of thousands of dollars. Liability insurance (insurance against third party liability) will help to avoid such unfortunate events.

How to choose the right insurance program and insurance company

There are about 50 insurance companies in the UAE, each offering different insurance options. Among the best known are AXA Insurance, Adamjee Insurance, MetLife-UAE, Dubai National Insurance & Reinsurance (DNIR), Arabia Insurance, Oman Insurance Company, Orient Insurance, Emirates Insurance, Alliance Insurance, Zurich Insurance. Special online services, which perform comparative analysis of offers in the insurance market, can help to determine the choice. For example, these are the popular online platforms of the brokers https://yallacompare.com/uae/ and https://insurancemarket.ae/. The user is required to fill in the form on the web-site: state whether one is a homeowner or a tenant, enter the estimated value of the property and personal items, and write down their contact information. After that, the service will select insurance programs from different companies, suitable for the customer. The broker or insurance agent will call then for further consultation, providing the customer with detailed information and advice on the best program. The criteria for the selection of the insurance program should be based on both price and what is included in it. The main criterion is that the amount of insurance stated in the certificate should cover the full value of the property or personal belonging. Carefuly look through every term of the certificate and which documents are required in case of insurance event. It is important to read carefully the whole contract: there are important nuances, such as under what circumstances the insurance sum is not paid. For instance, many companies refuse to cover any damage if the housing has been empty for more than 30 or 60 days. It is also important to analyse the additional benefits offered by insurance companies, which include the provision of temporary alternative accommodation during the renovation of the damaged property, reimbursement of rental costs or legal costs. Before signing a contract with an insurer, review its rating and read customers’ feedback. If one have no experience in housing insurance, they should use a broker. A good broker knows all the nuances and pitfalls that need to be taken into account when buying an insurance certificate. When buying an insurance, one should select a suitable program, which can cover losses in case of damage or theft of any items in the apartment: 

<ul><li><em>House contents insurance</em>: furniture, kitchen appliances, interior decorations, etc.;</li><li><em>Personal possessions insurance</em>: cell phones and laptops, watches, jewelry, clothes, even golf clubs.</li></ul>

Usually, such programs have a maximum amount of compensation set for any damaged or stolen item. The most common limit is AED 10,000 (USD 2,700). All expensive items, value of which exceeds this amount (jewellery, brand clocks, etc.) need to be included into the insurance contract separately. Each of these items increases the total cost of the insurance, but guarantees full compensation for possible damage.

Who should insure the housing – the tenant or the landlord?

There is a widespread misconception that the landlord is solely responsible for housing insurance. In fact, under the law, the landlord is required to insure the property only if the house is in a mortgage. Again, this is related only to the building itself, not the property it contains. If the owner of the property does not intend to use it personally, but plans only to rent it out, then only the premises are to be insured. It is also recommended to include a rental income protection in the insurance contract. However, the responsibility for the safety of house appliances lies with the tenant. When renting an apartment or a villa, the insurance will help to pay the damages if the personal belongings are damaged by fire, flooding or stolen. When renting a house with furniture and other contents, check with the owner if it is insured. If not, it is better to include any house content in the insurance contract. Thus, one would save their expenses if compensating the landlord (e.g., when children or pets damaged the furniture) is required.

How much real estate insurance costs in the UAE

Real estate insurance in the UAE is pretty much affordable. Since buildings are less exposed to risk than cars and personal items, the average insurance premium costs 0.1% of the insured value per year. Insurance of buildings on land reclaimed from seas is usually slightly more expensive, as the risks of natural disasters are considered to be higher. For house content insurance, the premium costs 0.5% of the total insurable value per annum. If one insured an apartment with 3 bedrooms worth AED 1.1M (USD 299,500) with house content and personal items worth AED 175,000 (USD 47,600), estimated annual premium should be AED 1,450 (USD 395). For renters of premises with the same conditions, the insurance contribution will be about AED 992 (USD 270). The insurance costs are, of course, individual. Some firms offer a insurance for only AED 400 (USD 109) per year (plus VAT). This is slightly more than 1 dirham per day. With this price, customers could receive up to AED 100,000 (USD 27,200) of compensation sum. To claim insurance payout, one must prove that the damage have been caused. Make in advance as many photos of the insurable building or property as possible, especially photos of valuable items. Any purchase receipts will also be useful, so keep them in a safe place to be able to provide any when the time comes. A credit card statement could be used if no receipts is presented.

Mortgage insurance when buying a property in Dubai

If one wants to take out a mortgage, any bank will require a buyer to have both real estate and life insurances. In the event that something should happen to the borrower, the bank will receive all insurance payments and the family of the deceased will be able to use the property safely. Most banks charge a monthly fee separate from the loan. The cost of life insurance depends on the age, health and lifestyle of the applicant, as well as the total insured value. It is recommended to add critical illness cover (CIC) to the mortgage. It will help to pay a loan on time if one is seriously ill and unable to work. Banks mostly offer to purchase their own life insurance certificates. However, a certificate issued by an independent insurance company is usually cheaper. Some banks accept this option, others require to insure one’s life with their program: it depends on the policies of the particular organization. Many banks offer a lucrative life insurance option where the insured value decreases over time with the reduction in mortgage debt. Such insurance programs are known as a decreasing-term life insurance, and they are usually less expensive. In October 2020, the United Arab Emirates Insurance Authority adopted a package of BOD-49 reforms that lowered the cost of life insurance in mortgage procedures. Under these changes, banks are required to reduce the rates of their domestic insurance policies. Before that, insurance premiums cost 0.4% to 0.6% of the mortgage sum, but after the reforms were adopted the cost of insurance has been reduced to 0.16%. Only new borrowers will be affected by updated terms, and those who have already borrowed will continue to pay the insurance on the previous terms. There is, however, a downside to this good news. According to experts of the mortgagefinder.ae, banks that are losing profits on insurance will compensate these losses by increasing the mortgage rate. Therefore, for those planning to take out mortgage, the experts recommend to get their mortgage approval before the end of this year, as the prices rise. Mortgage rates are now at their lowest level, and many banks have already reduced the cost of insurance.

Real estate insurance for off-plan home purchases

When buying off-plan property (a property that is still under development) future home owners have a question about how to secure their money if the developer goes bankrupt or froze the project. Although, there is no insurance for shareholders in the United Arab Emirates, still there are laws to protect investors’ funds. For instance, the money invested in real estate under construction in Dubai does not go directly to the developer, but to the escrow account. The developer has access to them only after entering a certain stage of construction, and the costs are strictly controlled by the State. Of course, the right way to protect the money invested in off-plan real estate is to choose a reliable developer with impeccable reputation. Among them are Emaar Properties, Damac Properties, Meraas Holding, Dubai Properties Group and others. The best option to be sure about the security of investments is to contact an experienced real estate agent who can find the suitable off-plan property.