The Tax Benefits of Insurance Plans in Ghana

Insurance isn’t just about financial protection; it can also provide significant tax advantages in Ghana. Let’s explore how this works, supported by credible data and real-life examples.

1. Tax Deduction on Life Insurance Premiums

According to PwC’s A Quick Guide to Taxation in Ghana, you can deduct life insurance premiums from your assessable income, provided the policy is with a Ghanaian insurer and premiums are paid in Ghanaian cedi. The deductible amount is the lower of:

• 10% of the sum assured or

• 10% of your assessable income

Example:

• Assume: You pay premiums of GHS 2,000 on a life policy with a sum assured of GHS 30,000.

• 10% of sum assured: GHS 3,000

• 10% of assessable income: say your income is GHS 20,000, so 10% = GHS 2,000

You can deduct GHS 2,000 (the lower amount) from your taxable income.

By reducing your assessable income, you effectively lower your taxable income, resulting in immediate tax savings and making life insurance not just protective, but also tax-efficient.

2. Tax-Free Life Insurance Payouts

The Ghana Revenue Authority (GRA) confirms that life insurance proceeds received from a resident insurer are exempt from income tax. This means your beneficiaries won’t pay tax on the amount they receive upon your death. 

Example:

Your policy pays out GHS 100,000 upon your passing. Your beneficiaries receive the full GHS 100,000 completely tax-free.

3. VAT and Levies on Insurance Premiums

Recently, it was announced that non-life insurance premiums (e.g., property, health, travel) will incur VAT and levies. In contrast, life insurance remains VAT-exempt.

Example: A non-life insurance premium of GHS 1,000 will attract:

• NHIL (2.5%): GHS 25

• GETFund (2.5%): GHS 25

• COVID-19 Levy (1%): GHS 10

• Subtotal: GHS 1,060

• VAT (15%): GHS 159

• Total tax: GHS 219 – meaning a 21.9% effective additional tax burden. 

Meanwhile, life insurance avoids these charges, another tax advantage.

4. Summary Table of Tax Benefits

5. Why These Benefits Matter

• For individuals: Claiming deductions lowers taxable income, meaning less tax and more savings.

• For families: Death benefit tax-exemption ensures beneficiaries receive full financial support.

• Compared to non-life policies, Life insurance stands out for its tax efficiency.