Sum Insured in Ghana Insurance
The sum insured is the maximum amount an insurer will pay out on any single claim or in total over the policy period. Setting the right sum insured is one of the most important decisions in buying insurance — too low, and you are underinsured; too high, and you are paying unnecessary premium.
What does sum insured mean for different policy types?
Motor insurance: The sum insured is the market value of the vehicle at the time of taking out the policy. For comprehensive policies, this is the maximum the insurer will pay if the vehicle is written off.
Assets All Risks (AAR): The sum insured represents the replacement value of each insured item. For buildings, this is the rebuilding cost (not market value). For contents and stock, it is the replacement cost of new equivalent items.
Public Liability: The sum insured (called the limit of indemnity) is the maximum the insurer will pay for any one claim or in aggregate during the policy year.
Fidelity Guarantee: The sum insured represents the maximum loss per incident the insurer will cover.
Underinsurance in Ghana — the Average Clause
Underinsurance occurs when the sum insured is less than the true value of the insured property. In Ghana, most property insurance policies contain an Average Clause: if you are underinsured, the insurer will only pay the same proportion of your claim as your sum insured bears to the true replacement value.
Example: Your stock is worth GHS 200,000 but you insure it for GHS 100,000 (50% of actual value). You suffer a GHS 40,000 loss. The insurer pays only 50% × GHS 40,000 = GHS 20,000 — not the full GHS 40,000.
The lesson: always insure to full replacement value to avoid the Average Clause penalty.
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Frequently asked questions
How do I calculate the correct sum insured for a building in Ghana?
Use the rebuilding cost — not the market value or purchase price. The rebuilding cost is the cost of demolishing the existing structure and rebuilding it from scratch at current construction rates. For commercial buildings in Ghana, brokers recommend using a professional valuer or the insurer's own valuation service. Buildings should be revalued every 2-3 years to keep pace with construction cost inflation.
What happens if my sum insured is too high in Ghana?
Insurance is an indemnity contract — the insurer will only pay the actual value of your loss, not the sum insured. If you over-insure and make a claim, you receive the actual loss value, not the inflated sum insured. The only effect of over-insuring is that you pay a higher premium than necessary.
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