Insurance terminology is not easy to understand for many, which is why a lot of people fail to select the right insurance policy. Many insurance-related terms have complicated meanings but can be understood when you dig a little deeper to gain better clarity. One such term is the sum insured, which is one of the primary factors related to buying non-life insurance policies.
In this blog, we will refer to sum insured meaning in relation to health insurance to help you better understand the subject.
What is Sum Insured in Health Insurance?
Sum insured refers to the maximum insurance coverage amount that an insurance company can pay to you (policyholder) in case of any medical emergency. In other words, you need to incur the additional amount out of your pocket if the total of medical bills is higher than the basic sum insured chosen under your health insurance policy.
Also Read: All About Health Insurance in India
Sum Insured Meaning in General
It is the maximum amount you will receive from the chosen insurer in case of any damage, injury, or loss suffered by you (the insured). Sum insured works on the principle of indemnity and provides coverage for compensation of the loss you incur. It is usually applicable/relatable to non-life insurance policies, including health insurance, home insurance, and motor insurance.
Example of Sum Insured in Health Insurance
Mr. Shah bought a health insurance policy at an affordable price with a sum insured for Rs. 10 Lakhs. Within the policy year, he faced a medical emergency and got hospitalized to get treatment. The total medical bills turned out to be Rs. 8.2 Lakhs and the claim got approved without hassles.
After a month, he faced the same health complications and got hospitalized again. The medical bills were worth Rs. 2.2 Lakhs this time. Since he had only Rs. 1.8 Lakhs remaining from the chosen sum insured, he had to bear Rs. 40,000 out of his pocket.
Impact of Sum Insured on Health Insurance Premium
As per its definition, sum insured implies there is an upper capping on the maximum insurance amount that you can claim in a year in case of an unfortunate event. The higher sum insured you select under your health insurance plan, the higher will be its premium.
In other words, sum insured is directly proportional to the premium payable.
What is the Difference Between Sum Insured and Sum Assured?
Many individuals feel confused about the difference between sum insured and sum assured, which are two fundamental terms related to different types of insurance policies. While many novice insurance buyers think of sum insure and sum assured as the same thing, there are several differences between the two.
The following table highlights the difference between sum assured and sum insured:
|Provides reimbursement of the incurred loss
|Provides a monetary benefit for the nominee/insured
|Applicable for non-life insurance policies
|Applicable for life insurance policies
|Reimburses only the amount pertaining to the losses, damage, or injury incurred
|Pays a pre-determined amount decided by the insurer based on the policy selection
|Does not lead to any monetary benefit to the insured
|Provides a monetary benefit to the policy nominee or the insured based on the policy type
You May Like to Read: List of Health Insurance Companies in India
What is the Importance of Selecting Appropriate Sum Insured?
The decision to choose the right sum insured under your health insurance policy lies in your hands. Selecting an adequate sum insured simply means your savings will remain intact in case of any health emergency during the policy period.
The right selection of sum insured gives you a sense of financial security and the resulting peace of mind. It is even more important in case you want or have chosen a family floater health insurance policy where the sum insured is shared amongst the family members.
How to Choose the Right Sum Insured?
You must consider the following parameters while selecting the right sum insured:
- Your age
- Current health condition
- Lifestyle followed
- Current life stage
- Number of dependents in case you want to buy a family floater plan
Visit BimaBandhu to Clear Your Doubts About Sum Insured
With health insurance, you want to stay prepared for any healthcare emergency that may arise in the future. Since sum insured selection is a critical decision, you must understand sum insured meaning and how it works before you buy any health insurance plan. At BimaBandhu, we aim to spread awareness about the need for insurance and various other aspects to our readers.
Sum Insured FAQs
What is the ideal sum insured for me?
The ideal sum insured selection for you should be based on factors, like your current age, regular income, lifestyle, your medical history, and medical inflation.
What is sum insured in medical insurance?
It refers to the maximum coverage benefits a health insurance company can pay you in a year in case of hospitalization.
How can I demystify the concept of sum insured?
Read BimaBandhu for better clarity.