Insurance basics

Insurance turns a big, unpredictable cost into a smaller, predictable one. Understanding a few words, such as premium, excess and exclusion, helps you choose cover well and avoid nasty surprises when you claim.

How insurance works

• Many people each pay a relatively small amount into a shared pool. The few who suffer a loss in a given year are paid from that pool. This is called risk pooling.
• You pay the insurer a regular amount, and in return the insurer agrees to pay for certain losses described in your policy.
• Insurance is for losses that would be hard to pay for yourself, such as a hospital bill, a car accident or a stolen laptop, not for small, everyday costs.
• The policy document is a contract. What it says, including the small print, decides what is paid.

Key words

• Premium: the amount you pay for your insurance, often monthly or yearly.
• Excess (called a deductible in the US): the amount you pay towards a claim before the insurer pays the rest.
• Cover (coverage): what the policy pays for and up to what limit.
• Exclusions: things the policy does not pay for, listed in the policy wording.
• Claim: your formal request to the insurer to pay for a loss.

Excess and premium: the trade-off

• Example: a phone repair claim of AED 1,200 with an AED 300 excess. You pay AED 300 and the insurer pays AED 900.
• Lemonade's UK example: a GBP 200 compulsory excess plus a GBP 300 voluntary excess makes GBP 500. So on a GBP 1,000 claim, you would pay GBP 500 and the insurer GBP 500.
• Choosing a higher voluntary excess usually lowers your premium, because you take on more of the risk yourself.
• Only choose a high excess if you could actually pay it from your emergency fund.

Health and car insurance in the UAE

• Dubai's Law No. 11 of 2013 requires health insurance enrolment for nationals, residents and visitors. Employers must enrol their employees, and sponsors must enrol the people they sponsor who are not covered by an employer.
• In Abu Dhabi, Law No. 23 of 2005 makes the health insurance scheme compulsory for non-nationals and their families, with employers covering employees and sponsors covering those they sponsor.
• Gulf News (updated September 2025) reports that from January 2025, basic health cover is required for all private sector employees and domestic workers in the northern emirates as well.
• Car insurance is mandatory for all registered vehicles in the UAE. The legal minimum is third-party liability cover, which pays for harm you cause to others but nothing for your own car.
• Comprehensive car cover is optional and also covers damage to your own car, such as theft, fire and often flood damage. It usually comes with an excess.

Claiming well

• Read your policy before you need it, so you know what is covered and what is excluded.
• Report a loss to the insurer as soon as you can and follow their process.
• Keep evidence: photos, receipts, reports from the police or a doctor where relevant.
• Be completely honest on applications and claims. Wrong or missing information can make an insurer refuse a claim.
• This lesson is general education, not insurance or financial advice. For a real policy, read the wording and ask a licensed adviser if unsure.