At Taajeer Finance, we are committed to ensuring that every amount you pay is clear, understandable, and supported by an explicit regulatory basis. One of the questions we receive most frequently is: What is the insurance difference, and why might a customer be required to pay it at the end of the contract?
This article explains the matter in simple terms.
First: Why Does the Company Arrange Insurance for the Vehicle?
Under a finance lease agreement, ownership of the vehicle remains with the company (the lessor) until the end of the contract, while the customer (the lessee) has the right to use and benefit from the vehicle.
Accordingly:
- The regulations require the finance company (the lessor), rather than the customer, to obtain comprehensive insurance and renew it annually throughout the contract term. This is in accordance with Article 24 of the standard finance contract and the Rules Governing Comprehensive Insurance for Vehicles Financed under Lease Agreements for Individuals, issued by the Saudi Central Bank.
- The purpose is to protect both parties by ensuring uninterrupted insurance coverage and protecting the customer against the risks arising from an expired policy.
Important note: The company’s obligation is to arrange and maintain insurance coverage; it is not an obligation to bear the cost of that coverage. As with other costs associated with the use of the vehicle, the cost is borne by the party benefiting from it.
Second: What Is the Regulatory Basis for the Customer Bearing the Insurance Cost?
This is based on three clear provisions:
The insurance premium is an actual amount paid to a licensed insurance company for a vehicle used and benefited from by the customer. It therefore falls within the costs that the contract requires the lessee to bear.
Third: Why Does an “Insurance Difference” Arise?
Because the insurance premium is not a fixed amount that can be determined in advance for the entire contract term.
Under the Saudi Central Bank’s rules, the insurance company reprices the policy annually based on:
- Changes in the vehicle’s insured value, including the annual depreciation rate.
- Customer-specific pricing factors, including claims history, applicable discounts, and other relevant factors.
Accordingly:
1. At the start of the contract, an estimated amount is calculated based on the selected premium for the first insurance year and included in the payment schedule.
2. The “Lessee’s Insurance Account” — a dedicated regulatory record maintained for you — records, year by year, the amounts actually paid to the insurance company against the amounts collected from you.
3. At the end of the contract, the account is settled as follows:
- If the amount collected from you exceeds the amount actually paid, the insurance surplus is refunded to you.
- If the amount collected from you is lower, the insurance difference is collected from you.
The settlement therefore works in both directions and may benefit you in many cases. Any discounts you are entitled to, such as a no-claims discount or loyalty discount, are credited to your account and affect the actual annual insurance cost.
Fourth: How Is Your Policy Priced? Does the Finance Company Add Any Margin?
No. The finance company (the lessor) provides the insurance premium to individual customers at its actual cost, without adding any disclosed or undisclosed fees.
The company does not set the price. Pricing is determined through a licensed insurance broker or agent that obtains quotations from insurance companies. Our renewal process is as follows:
- We begin the renewal process with the insurance broker up to 45 days before the policy expires.
- Quotations are obtained from several insurance companies, with a minimum of three quotations. In practice, we seek a larger number whenever possible — sometimes up to eight — to secure the most suitable and lowest-priced option for the customer.
- From among the three lowest-priced quotations, the lowest price is selected. This is the price presented to you and used to update your insurance account.
- Each vehicle is priced separately using an independent pricing reference specific to that vehicle.
You will also receive text messages confirming the renewal of your insurance policy. You may review the policy details, its cost, and your insurance account through the digital platforms of the insurance broker or insurance company.
Fifth: How Can I Obtain My Insurance Account Statement?
According to the comprehensive insurance regulations, you must receive an insurance statement annually. If you do not receive your annual statement, please contact us to update your contact information and provide you with the statement via the following methods:
- Call our Contact Center on the toll-free number 8002440088.
- Email us at Customer.care@taajeerfin.com.
- Submit your request through our Contact Us page.
- Our team will explain, year by year, how the insurance difference was calculated.
- A copy of the insurance account statement will be sent to your email address.
Frequently Asked Questions
Is the insurance difference an additional fee imposed by the company?
No. It is an accounting reconciliation between the amount actually paid to the insurance company and the amount collected from you. No margin or fee is added for the benefit of the finance company.
Can the difference be in my favor?
Yes. If the amount collected from you exceeds the actual insurance cost, the excess amount will be refunded to you as an insurance surplus.
When is the account settled?
Under the Rules Governing Comprehensive Insurance for Vehicles Financed under Lease Agreements for Individual Customers, the account must be settled within 30 days from the end of the finance contractual relationship.
Why was the amount not fixed at the start of the contract?
Because the insurance company reprices the premium annually based on the vehicle’s value and relevant pricing factors. The lessor cannot fix this amount in advance for the entire contract term.
I object to the amount. What should I do?
You may contact us through any of the following channels and submit your objection:
- Call our Contact Center on the toll-free number 8002440088.
- Email us at Customer.care@taajeerfin.com.
- Submit your request through our Contact Us page.
You also have the right to submit your objection through the Saudi Central Bank’s SAMA Cares platform. In all cases, your request, objection, or complaint will be registered and handled in accordance with the applicable laws, regulations, and Saudi Central Bank instructions. You will also be informed of the escalation process if you are not satisfied with the outcome.
Regulatory References
| Reference | Summary |
|---|---|
| Article 19 of the Finance Contract — Paragraphs (1), (2), and (3) | The lessee bears the actual cost of all costs and expenses paid by the lessor to third parties in connection with the lessee’s use and benefit from the leased asset. The lessor may claim those amounts from the lessee. |
| Article 24 of the Finance Contract | Requires the lessor to maintain comprehensive insurance on the leased asset throughout the contract term. |
| Comprehensive Insurance Rules — Article 6 | Expressly provides that the insurance account is to be settled at the end of the contractual relationship and allows the lessee to be charged additional amounts where the lessor has paid premiums exceeding the amounts collected from the lessee. |
This material has been prepared for financial awareness and education purposes. It does not replace reviewing the finance contract, its appendices, or the Rules Governing Comprehensive Insurance for Vehicles Financed under Lease Agreements for Individuals issued by the Saudi Central Bank. In the event of any discrepancy, the provisions of the contract and the applicable laws and regulations shall prevail.
