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Canceling an insurance claim is not an uncommon procedure in the UAE. The cancellation policy followed by the insurers in the UAE is relatively easy and trouble-free. But there are some things that the policyholders should keep in mind before he/she looks to cancel their existing policy. First, let us find out why people cancel their insurance policies.

Why Do People Cancel Insurance Policy

The main reason why people cancel insurance policies is that they have found a better insurance product that suits their requirements at a better price. Most people are price sensitive and a small drop in the monthly insurance premium can translate to a large yearly savings of the same. It is said that an average UAE resident has at least two insurance policies under their name. The savings arising from switching insurance policies midway is life-changing for most. This is why people generally cancel insurance policies in the UAE.

Alternatively, when an expatriate is temporarily or permanently relocating out of the UAE or due to an adequate lack of research, and or satisfaction with existing policy performance can be other reasons why people switch policies.

Documents Required to Cancel Insurance Policy

Documents usually required to cancel insurance policies include the following:

Relevant Vehicle Documents - Vehicle registration documents, vehicle ownership transfer documents, and all other documents that offer a glimpse into the make, model, and year of manufacturing of the vehicle.

Individual Documents - Policyholder's documents like a passport with visa, Emirates ID are examples of individual documents required for this purpose. Drivers license, GCC approved confirmation document, details of previously registered claims if any, are other documents asked by the insurer for the same.

Consequences of Cancelling the Policy

Some of the major consequences of canceling the policy that the policyholder should keep in mind are as follows:

Breach of Contract 

In certain instances canceling the policy, midway can result in a breach of contract. This is especially true in the case of car insurance policies. Imagine you are buying a car and it is financed by a financial institution, in the contract you signed between the two parties it might be mandatory to maintain a comprehensive car insurance policy until the loan is fully repaid.

When a person enters into such a contract it becomes a breach of contract if he cancels his existing policy. In such instances, it is advised that the policyholder sticks to the existing policy till the car loan is fully paid.

An alternative way to avoid this scenario is by doing thorough research about car insurance online before committing to the insurance policy. This will certainly save you time and effort in the future.

It Could Drastically Affect the Insurance Premium

Insurance companies in UAE usually offer discounted premiums for loyal customers. When a customer jumps from one insurer to the other in short succession he/she will not be entitled to this loyalty discount. Furthermore, a customer with a proven track record with an insurance company can receive deductibles for the unclaimed years with the insurer. The deductibles can be as big as 50 percent of the premium.

A person who switches policies on a regular basis might not be entitled to these benefits. Hence the savings that you are looking to make in the short term might not justify the long-term savings arising from being a loyal customer.

Mandatory by Law 

If you are a UAE resident then it is mandatory to own certain insurances like health insurances, car insurances - if you own a car, to name a few. For example, it is mandatory to hold health insurance in Dubai and the non-compliance of the same can invite a fine of AED 500 a month. In the case of an expat, the government will not renew visas or grant residents without a health insurance policy that meets the regulatory requirements.

Hence it is important that policyholders consider this aspect before going ahead with the cancelation process. The best way to overcome this hurdle is to buy another health insurance in Dubai before canceling the former policy.