Will your claim be cut because your sum insured is too low?

A low sum insured makes the premium cheaper and can make every claim smaller.

What is the average clause?

A term that reduces a claim in proportion when you insured too little. GIG Gulf’s handbook and QIC’s 2016 wording use the same words: “If on the happening of a claim the property at risk is of greater value than the Sum Insured, the amount payable will be reduced in proportion.”¹²

The reduction applies to partial losses, not only total ones. The insurer works out what share of the real value you insured, and pays that share of the loss.

Run your own figures in the under-insurance calculator.

How do insurers apply it?

The rule differs by insurer.

GIG Gulf’s first loss basis means it pays a contents claim up to the sum insured without the reduction, for contents insured at AED 350,000 or less.¹ Liva’s 25% margin means there is no cut unless the real value is more than 25% above the sum insured. For example, contents worth AED 120,000 insured for AED 100,000 are not cut; contents worth AED 150,000 insured for AED 100,000 are.³

Liva’s wording also says contents sums “must at all times represent the full cost of replacing the insured property”, and that if they do not, it “may make a deduction for wear, tear or betterment on all items lost or damaged”.³ For buildings, a sum insured below the rebuilding cost changes how Liva settles a repair: it pays, at its option, the repair cost less wear and tear, or the fall in value.³

What does the law say?

The 2025 Civil Transactions Law says the insurer “shall only be liable to indemnify the insured for damage resulting from the occurrence of the insured risk, provided that it does not exceed the sum insured” (Article 963).⁴ The proportional reduction itself comes from your policy wording, not from the law.

How do you avoid it?

• Contents. Add up the cost of replacing everything as new, room by room. Use the contents value worksheet.
• Buildings. Insure the rebuilding cost, including demolition and professional fees. GIG Gulf’s handbook says the buildings sum insured “must at all times represent the full cost of rebuilding to the same specification including demolition costs, architects and surveyors’ fees”.¹
• After a big purchase, tell your insurer and raise the sum insured. Liva asks you to write within 14 days if the sum insured in your schedule has changed.³
• At renewal, check the figure again. Some policies offer an automatic yearly increase, shown in the schedule.¹