Why UAE residents do not care to insure personal belongings

Home contents insurance is not very popular, but has become a topic of debate ever since a fire broke out at Dubai's Tamweel Tower in Jumeirah Lakes Towers.

In the weeks after the fire, insurance companies reported of a surge in the number of customers asking for their home contents to be insured.

Hearing the horrific tales about the fated residents of the tower who had lost everything was something a lot of people apparently could relate to and many wondered; what if this happened to me?

"People tend to think that this would never happen to them. But this incident has made a lot of people realize that it could happen to them," said an affected resident of Tamweel Tower at the time the incident had just taken place.

"When I told my relatives what had happened to me they asked for a quotation from an insurance company straight away," she said.

The lady and her husband saw their apartment go up in flames and the value of personal property/belongings lost was difficult to arrive at as the couple had never sat down and drawn up a list of personal valuables that they owned.

"I think I will start missing things after some time," said another resident. "Right now I can only calculate the value of some precious items."

Around the same time a study suggested that the majority of UAE residents underestimate the value of their belongings by almost a half.

As the study concluded, many UAE residents would be in for a big shock if they were forced to replace their home contents due to unforeseen circumstances, since it would actually cost them double their estimate to replace everything in their homes.

The fire has opened a lot of residents' eyes. UAE residents were not very conscious about the value of their home contents, or at least of the options to secure them.

"This is common around the world," comments Robbert Pacella, a financial consultant working in Dubai. "But there is certainly some kind of resistance against the idea of home content insurance.

"People here move houses a lot. Some people live out of a suitcase; they do not have a lot of home content," Robbert argues.

At the same time the UAE is a relatively safe country, which makes residents feel secure, he thinks.

"Home contents insurance is often purchased to anticipate loss of items due to burglary or theft, while fire damage is a less likely option to take in consideration," he explains.

"A big fire like the one in Tamweel Tower is not so common. And this is a relatively safe country, so people do not tend to think about insuring their home contents."

But according to Ahad Khalid, a UAE insurance broker, security should not be taken for granted. "People feel that nothing can happen here. But anything can happen," he argues.

When that something happens the loss of legal documents is one of the most frustrating parts, he thinks.

"Retaining your legal documents can cost a lot of money and time. Think of passport, credit card or cash. When these items are insured they can easily be retained."

According to Ahad, home contents insurance does not only look at the risk of a house fire or burglary. Items can be lost or damaged in many other ways too, he points out.

"For example, you might have a guest in your house and that guest accidently damages your laptop. Let us say this laptop is worth Dh7,000. Your friend will not give you that money," he says.

When it comes to reimbursement claims under home contents insurance policies, lost and damaged items are the most common claims made, Ahad tells.

"We had a customer who had lost her engagement ring worth Dh35,000 and we reimbursed it. Another customer broke the glass of his expensive watch while diving. If you have damaged your phone and you have home contents insurance, this would be reimbursed too.

"People do not realise what the benefits of home contents insurance are," he says. And this is surprising, because it actually does not have to cost much.

Depending on the estimated value of your come contents a resident can ask for a quotation from an insurance company.  "The costs of the insurance might be around Dh500-700 a year," Ahad says.

"The benefits of home contents insurance are not really well advertised by insurance companies," he adds. "The main focus is on motor insurance, which covers the largest market."

"As a result people are not very well informed about home contents insurance."

At the same time there is no legal obligation towards insuring your home contents, which is the case in some other countries. "Unfortunately there is no law that prescribes landlords or tenants to have their home contents insured.

"Such an initiative would create more awareness among the public," Ahad argues.

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