Simplifying Life Insurance in India

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Differences Between Sum Assured and Death Benefit

While purchasing a life insurance plan, individuals carefully look for the policy coverage, which includes sum assured, maturity benefits and death benefits, etc. Among all these, sum assured and death benefits are quite similar, yet there are subtle differences. Therefore, before purchasing a life insurance policy, you must be properly aware of the differences between sum assured and death benefit.

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What is Sum Assured?

Sum assured is the amount that a nominee will get in case the insured individual dies within the policy’s terms. Policyholders determine this sum assured amount while taking the policy coverage.

It is a guaranteed amount that an insurance provider must give to a nominee in case the insured individual’s death comes under the inclusion criteria of the policy.

What is Death Benefit?

It is the total minimum amount that an insurance company must pay to nominees of policyholders if they die within the policy period.

The value of this benefit is variable. Death benefits may include bonuses, riders’ benefits, etc., in addition to the sum assured amount.

Sum Assured Vs Death Benefit

The following are some key differences between sum assured and death benefit:

Parameter	Sum Assured	Death Benefit
Definition	It is a predetermined amount that an insurance company will have to provide to nominees in case of the sudden demise of insured individuals. So, it is also a death benefit.	Death benefit is also the amount that nominees get after the death of a covered individual within the policy term. However, its total value is not predetermined. This is because claimable amounts of additional benefits are variable.
Amount	Sum assured amount is lower than the death benefit.	Death benefits include the sum assured as well as additional bonuses. So, it is higher in amount.

Knowing these inherent differences between sum assured and the death benefit is important to understand the exact financial coverage your family gets under the policy. You should choose a suitable life insurance plan keeping their needs in mind.

FAQs about Sum Assured and Death Benefit

How to claim death benefits of a life insurance policy?

You need to first get in touch with the insurance company to inform them about the policyholder's demise. After that, you will have to fill in the claim form properly and submit it with all the necessary documents. After this, the insurance company will provide you with the death benefits after completing the investigation and document verification processes.

What is the maturity benefit?

A life insurance plan's maturity benefit is an amount you will get after the end of your policy period. The insurance company directly pays this amount to the policyholder.

What are the documents that I need to provide to claim death benefits?

Following are some important documents that you will need to submit to claim death benefits:

Original policy papers
Death certificate
Age proof of the policyholder
ID proof of nominee
Hospital records
Medical certificate

You may have to submit a Police FIR and post-mortem report if the death is unnatural.

How do life insurance companies calculate the sum assured and death benefit?

Life insurance companies determine the sum assured based on factors such as age, income, and policy type. The death benefit includes the sum assured plus any bonuses or rider benefits. For term plans, the sum assured is the primary death benefit, unless it is enhanced by add-ons.

What is the minimum death benefit that an insurance company will have to provide?

IRDAI mandates that insurance companies will have to pay a minimum death benefit, as mentioned below:

If policyholders are below 45 years old, the minimum death benefit will be at 10 times of premium.
If policyholders are above 45 years old, this benefit will be at least 7 times of premium.

Why do some term insurance companies offer a lower sum assured than the death benefit?

This usually happens when the policy includes riders like accidental death cover or premium waiver benefits. Term insurance companies adjust the payout based on additional coverage. Always compare policies to ensure you get adequate protection.

Is the death benefit always equal to the sum assured?

In pure term insurance, yes. Death benefit equals sum assured if the policyholder dies during the term. However, some term plans with riders like, critical illness or accidental death may offer additional payouts, increasing the death benefit beyond the base sum assured.

What is the Difference between sum insured and sum assured?

Sum Insured refers to the maximum damage or loss compensation coverage, commonly used in home or health insurance. It works on an indemnity basis, meaning claims reimburse actual expenses up to the insured limit.

Sum Assured, on the other hand, is a predefined guaranteed payout given to the beneficiary upon death or maturity.

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