What is Sum Assured & How is it Different from Sum Insured?

What is the Meaning of Sum Assured?

How to Calculate the Ideal Sum Assured for You?

How is Sum Assured Different from the Sum Insured?

If you have been planning to purchase an insurance policy, you must have heard about another term - "sum insured". Unlike sum assured that is paid to the beneficiary upon the untimely demise of the insured, sum insured is the maximum amount that a policyholder can claim once a year for any insured event.

For example, the sum insured for a health insurance is the maximum amount the insurer will pay for your medical expenses that are covered by the policy.  

It is pretty common to get confused between sum assured and sum insured. However, these two are significantly different from each other and have entirely different purposes. 

The differences between sum assured and sum insured have been discussed below:

Parameters Sum Assured Sum Insured
Applicability Sum assured is only applicable for life insurance policies. Sum insured is applicable for other types of insurance plans such as health insurance, car insurance, etc.
Definition It is a guaranteed sum that the policy provider must pay to the beneficiary in case of the untimely demise of the insured. The policyholder receives this sum as reimbursement or compensation depending on the expenses incurred as per the policy agreement.
Relation with Maturity Benefit One can avail life insurance plans with maturity benefits (sum assured + bonuses) if the policyholder survives the policy tenure. There is no such thing as a maturity benefit with sum insured.
Mode of Calculation Sum assured can be calculated through the HLV method. Sum insured depends on the value of the asset. For example, if you have vehicle insurance, the insured amount will depend on the damage incurred or by your vehicle, depending upon your insurance plan.

Factors to Consider while Calculating the Ideal Sum Assured Amount for You

FAQs Related To Sum Assured

Is sum assured the same as death benefit? up-arrow

No, sum assured usually means the minimum guaranteed amount that is paid to the beneficiary in the unfortunate event of the insured’s demise. On the other hand, death benefit is the minimum sum assured plus bonus that is paid to the nominee if the policyholder dies within the policy’s tenure.

What is the difference between maturity and sum assured? up-arrow

Maturity amount is the sum paid to the policyholder by the insurer after the term of a certain policy ends. On the other hand, sum assured is the guaranteed amount paid to the nominee of an insurance plan without including any bonus amount.

Can the maturity amount be less than sum assured? up-arrow

No, usually the maturity amount is higher than the sum assured as it also includes the bonuses payable upon the maturity of the policy. In contrast, sum assured is only the minimum guaranteed amount.

Is it necessary to add riders to my basic life insurance plan? up-arrow

Adding a rider will only enhance your insurance benefits. If you have any critical illness or a probability of having some hereditary disease, you may want to add a critical illness rider, but this will also result in paying higher premiums.

How can I choose the best insurer for me? up-arrow

It is advisable to do in-depth research about the top insurers in the country and choose the one best suited for you. Checking their reviews and ratings of insurance companies and their claim settlement ratio will give you a fair idea about the insurer.

What happens after the life insurance term ends? up-arrow

When the tenure of a life insurance policy ends, the policy simply expires. The policyholder doesn’t have to pay any more premium amounts because the policy becomes inactive and there is no longer a death benefit.

Do I need to pay tax on the sum assured? up-arrow

Any sum assured amount received at the time of maturity of an insurance policy is exempted from taxation as per Section 10(10D) of the Income Tax Act.