Best policy for peace of mind

Victims of the recent fires in Sharjah could have protected their belongings and ensured they had vital emergency accommodation for as little as Dh250 a year - had they taken out home contents insurance.

A resident of Al Baker Apartments, in Sharjah, whose apartment was gutted by a fire. Jeff Topping / The National

A recent spate of fires in high-rise apartment blocks in Sharjah has left hundreds of residents homeless. But as well as the destruction such a catastrophe can cause, almost none of the tenants had taken out a home contents insurance policy.

This meant that as well as having no alternative accommodation to go to, they also had to fund the refurnishing of a new home.

In the most recent incident, in Al Tayer Tower in April, believed to have been caused by a discarded cigarette, hundreds of families from the block's 408 apartments were made homeless.

Sadly, because the residents relied on the building's insurance policy - which covers repairs to the building itself and not the tenants' personal belongings - they have virtually no hope of compensation.

For Hassan Emm, who lived in one of the gutted flats, the reality of losing everything is compounded by mounting hotel bills he can ill afford while he tries to find new accommodation.

"I lost everything and still find trouble coping with the situation, to find a new flat and start furnishing it," Mr Emm says.

Sadly, his story is a tragic reflection of the nation's low penetration rate for home contents insurance. Experts estimate only 5 per cent to 10 per cent of residents take out a policy - compared with 40 per cent or more in parts of Europe - meaning the majority are putting their personal belongings at risk.

"Ninety per cent of the UAE population is not insured and while the need to make a claim for your home is less likely than for your car, the claims are very high and it could have a very strong impact on the financial health of the family and your savings," says Alexis de Beauregard, the chief officer of marketing and retail product offering for AXA Insurance in the Arabian Gulf region.

What surprises Mr de Beauregard is that residents such as those living in Al Tayer Tower, who pay about Dh38,000 annually in rent, can cover their possessions for as little as Dh250 a year.

"When you think about it, it's ridiculous not to get insurance because cover for our products starts at less than Dh1 a day - that's one less coffee a month to pay your insurance premium."

That amount will cover all the standard problems, such as fire, theft, storms, water leaks and flooding, as well as alternative accommodation in the event of a claim, and worldwide protection for your personal belongings for up to 60 consecutive days when you are away on holiday.

Mr Beauregard believes uptake is low because home insurance is not mandatory in the UAE. People are unaware of the benefits of having a policy and many are risk-averse, believing they don't actually need one, he says.

But despite low crime rates and a low risk of natural disasters, such as earthquakes, residents need to be on their guard.

Jeremy Baggott, the head of private clients at the international insurance firm Zurich, which caters to higher-end clients as opposed to the standard market, says the biggest problem is people thinking they are safe.

"There's a misconception here that the main threat to your contents is fire, but in our experience theft does happen," he says. "The one thing that happens all the time is accidental damage - whether it's water leaking from the air conditioner or water damage from burst pipes while you're away in the summer.

"And don't forget about flooding. We may live in the desert, but when it rains, the properties aren't designed for it so we see instances of water leaking through the roof or coming under the doors."

Another big cause of claims is residents being robbed of their personal possessions while overseas. Mr Baggott also warns of the risk of shipping your valuables, quoting an American study that revealed 48 per cent of all art losses occur in transit.

"We've got clients with properties all around the world, shipping contents like fine art from a base in the UK to a base in Dubai and if it gets damaged and the client doesn't have insurance, then they are suffering a large loss."

Zurich, which charges Dh17,500 for contents worth Dh5 million, takes a bespoke approach to claims. While standard insurers ask clients to value their contents in slabs such as up to Dh75,000 or between Dh75,000 to Dh150,000, listing any items valued over a certain amount separately, Zurich's cover is broader and offers customers an all-risk cover. Policies come with worldwide cover for all contents and lost items are replaced with new.

Mr Baggott recalls a claim for a US$20,000 (Dh73,462) photographic print that was damaged after a Swiss gallery shipped it to a client in Dubai.

"The frame's glass broke and damaged the print. The client wanted a reprint so we contacted the artist who agreed to do another print subject to us sending the original back. We framed the new image over here so that this incident didn't happen again and the client was over the moon."

But it's not only damage to your precious items you need to be wary of. By not having adequate cover in place, you risk paying out huge sums if you accidentally damage another person's property or even injure someone.

"If you damage your flat and the landlord wants you to pay him back because you are fully responsible under the contract, that's where tenant liability can be made available," says Mr de Beauregard.

"You've also got third-party liability. If, for example, something on your balcony falls onto a high-value car below - then who pays for the car that is damaged? You will be liable for the damage or any medical expenses if you injure someone. "

Cases where no insurance is in place can see residents taken to court with the possibility of big payouts for repair costs and legal expenses, or even a jail sentence if the situation cannot be resolved.

But Mr de Beauregard says making contents insurance compulsory in the UAE, as it is in other nations around the world such as France, would not solve the issue because mandatory products would not suit everyone's needs.

Instead, the sentiment among insurance experts is that it's up to the industry itself to spread the message and make residents aware of how vital contents insurance actually is.

"People see it as hard work because insurers ask them to list items at relatively low values so insurers need to make it as easy as possible," says Mr Baggott, who adds that Zurich is working hard to spread the word to art collectors in the region about the importance of insuring their valuables through its new three-year sponsorship of Christie's biannual auctions in Dubai.

While Zurich offers an appraisal service, which assesses the value of a client's contents to save time, the standard market expects residents to make their own assessments. But with the process usually taking place online at a relatively low cost, it's only those without a policy in place who suffer in the event of a claim. That's something that Mr Emm, the Sharjah fire victim, is very aware of.