Imagine you’re driving in Dubai, going about your day, and suddenly—bam!—someone hits your car. Now, your vehicle is in the shop for repairs, and you’re left without transportation for days or even weeks. That’s where the loss of benefit (use) allowance can come into play. In the UAE, this allowance is important under third-party liability insurance, protecting the third party in accidents where their vehicle is damaged.
Let’s dive into what the loss of use allowance really means, how it works, and how it can benefit you if you find yourself in such a situation.
Understanding loss of use allowance
The loss of use allowance is a benefit provided to the third party whose vehicle is damaged in an accident caused by another insured driver. It compensates for the time the third party’s vehicle is in the repair shop, covering either a cash benefit or a substitute rental vehicle.
According to the Central Bank of the UAE, the injured third party is entitled to daily compensation for the loss of use of their vehicle. This amount is based on the rental cost of a similar car. This is part of third-party liability insurance in the UAE, ensuring the injured person can get around while their car is in the service centre.
Why is loss of use allowance important?
The loss of benefit allowance ensures that people affected by an accident caused by another driver aren’t stuck without transportation.
For instance, imagine being a family in Abu Dhabi with limited public transport options. Your car is essential for daily tasks like commuting to work, dropping kids at school, or grocery shopping. Without the loss of benefit allowance, you’d either need to pay out of pocket for a rental car or make do without your vehicle, which can cause a lot of inconvenience. The loss of use allowance eliminates this discomfort.
How does loss of use allowance work?
Here’s a clearer breakdown of the process:
| Criteria | Details |
| Eligibility | Available to the third party when their vehicle is damaged in an accident caused by another driver, and they choose to repair the vehicle instead of cash. |
| Exclusion | If the third party opts for cash compensation instead of repairs, they lose the right to receive the loss of benefit allowance. |
| Start date | The allowance is activated when the vehicle is handed over to the repair shop, and all necessary documents (such as the accident report and title deed) are submitted to the insurance company. |
| Allowance limit | The company will cover the loss of benefit allowance based on the daily rental rate of a similar vehicle, using the usual rental prices in that Emirate, but not more than 300 dirhams per day. This allowance is limited to a maximum of 15 days.For example, if repairs take 4 days, the third party could receive up to 1,200 AED or a rental vehicle. |
| Alternative option | Instead of a cash allowance, the insurer may choose to offer a substitute vehicle of the same make and in good condition, which would be delivered to the third party. |
Claiming the loss of use allowance
If you’ve been involved in an accident and your car is in the repair shop, follow these steps to claim your loss of use allowance:
- Submit documentation: Ensure that the accident report, repair shop details, and other required documents are submitted to the insurance company.
- Choose between cash or substitute vehicle: Decide whether you’d prefer the cash benefit or a substitute vehicle. Remember, the clock for the benefit starts from the day the car is handed over for repairs.
- Work with the insurer: Coordinate with the insurance company throughout the process to ensure all requirements are met and the claim is processed efficiently.
- Monitor repair progress: Keep track of the vehicle repair timeline to ensure that you’re compensated correctly for the number of days your car is out of service.
Exclusions to be aware of
Here are some important exclusions to be aware of when claiming the loss of benefit allowance. Understanding these exceptions can help avoid any surprises during the claims process:
- Non-repairable vehicles: If your car is declared a total loss, the loss of use allowance does not apply. You will normally receive compensation based on the vehicle’s market value instead.
- Delayed documentation: The allowance starts only after submitting all required documents (e.g., accident report, repair shop details). Delays can result in postponement or denial of the benefit.
- Fraudulent claims: False claims, such as fabricating damage or fake receipts, may lead to penalties and rejection of the claim.
- Extended repair time: The allowance covers up to 15 days. Repairs that exceed this time will not be compensated beyond that period.
- Disputed liability: If the fault is disputed, the allowance may be delayed until responsibility is determined.
Being aware of these exclusions ensures smoother processing of your claim and helps you manage your expectations regarding compensation.
Final takeaway
There you have it- the loss of use allowance- which ensures you’re able to get transportation when your car is being repaired after an accident. It gives you the option to either earn extra cash each day or rent a car to continue going about your life with as little disruption as possible.
Accidents are stressful enough, but understanding how this allowance works—what you’re eligible for, when it starts, and the limits—can make the whole process smoother. Keep in mind the exclusions so you don’t run into any surprises, and work closely with the car insurance company to get everything sorted quickly. At the end of the day, the allowance is there to help you get back on track without too much hassle.
Frequently Asked Questions (FAQs)
What if I choose cash compensation instead of repairing my vehicle?
If you choose cash compensation for vehicle damages instead of repairs, you won’t be eligible for the loss of benefit allowance.
How long can I receive the allowance?
The loss of use allowance is provided for a maximum of 15 days. If the vehicle takes longer than that to repair, you’ll need to cover the additional costs yourself.
Can I get a replacement vehicle instead of the cash benefit?
Yes, the insurance company can provide a substitute vehicle of the same make and model if you prefer that over the cash allowance.
