Demystifying The Truth Behind Sum Insured Vs Sum Assured Comparison

Sum Assured Vs Sum Insured - BimaBandhu

The insurance-buying process becomes easier for individuals if they get to understand the deeper meaning behind several insurance-specific terms. Getting the right answer for such terminologies can become complicated for many. One such combination of complex insurance terms is sum insured vs sum assured.

Although sum insured vs sum assured comparison lies at the core of insurance purchase decisions, many people use these terms interchangeably. You might have even heard of instances where the confusion between sum assured vs insured has led people to drop their idea of buying insurance policies. Although these two terms sound similar, they have unique, different meanings.

In this blog post, BimaBandhu will help you understand the differences between sum assured and sum insured.

Sum Insured Vs Sum Assured Comparison: Definitions

What Do You Mean By Sum Insured?

Sum insured refers to the amount that an insurer agrees to pay to the policyholder in case of the occurrence of insured events. It also covers an upper capping on the maximum insurance benefit you can avail of with your insurer policy. Within the sum insured vs sum assured comparison, the primary difference is their applicability on different types of insurance policies.

On one hand, sum insured is related to home insurance, health insurance, and motor insurance – non-life insurance policies that are based on the indemnity principle. These types of policies cover the losses due to the damages incurred to the insured individual or asset only.

The following example will help you understand this aspect of sum insured vs sum assured comparison –

You buy a health insurance policy with a sum insured of Rs. 2 Lakhs. In case of any unexpected medical hospitalization, the total treatment costs come out to be Rs. 2.25 Lakhs. Since the chosen sum insured was less than the total bill, the insurance company will only benefit you with the bill settlement or reimbursement up to Rs. 2 Lakhs. You need to bear the remaining bill amount out of pocket. However, if the bill amount is less than the selected sum insured, the total medical bills will be paid by the insurer.

The fundamental idea behind this side of sum insured vs sum assured comparison is that the insurance policy should not result in any additional monetary benefit to the insured.

Recommended Read: All About Sum Insured

What Do You Mean by Sum Assured?

Sum assured, as the name suggests, is the pre-decided insurance amount/benefit payable to the policyholder or policy nominee in case of the insured event’s occurrence. In terms of the sum insured vs sum assured comparison, most people think of sum assured as the amount to be received by the insurer.

For example – when you buy a term insurance plan, the life insurance company guarantees to pay an amount – says Rs. 50 Lakhs or Rs. 1 crore, whichever you select. This amount is commonly referred to as sum assured. 

You should also know the following things about sum insured vs sum assured comparison:

  • Sum assured is also known as death benefit as defined in the detailed policy document for many many pure protection policies.
  • The higher sum assured or death benefit you select while buying a life insurance policy, the more premium will be payable.
  • Selecting an adequate sum assured is one of the most crucial aspects of buying life insurance.

Read More: What Should You Consider While Selecting the Right Sum Assured?

Sum Assured Vs Sum Insured Comparison: What Else Should You Consider:

  • While selecting a sum insured to insure an asset, you must consider its value so that you can get maximum compensation in case of an unforeseen but insured event.
  • While considering sum insured vs sum assured comparison to buy health insurance, select a suitable sum insured that will be sufficient to cover healthcare cost in case of an emergency. Also, deep dive into the change in insurance premium as you increase the sum insured.
  • For a family floater health insurance plan, select a cover that will be sufficient to cater to the medical needs of all your family members.
  • For life insurance buying decisions, keep in mind your current income, regular expenses, and any outstanding financial liabilities.
  • Your sum assured should be adequate enough to pay off financial liabilities in your absence.
  • Make sure you consider the life insurance premium and select a plan whose premium can fit your budget.

Sum Insured Vs Sum Assured Comparison At a Glance

The following table brings forward some of the major differences between sum insured and sum assured:

Parameter Sum Insured Sum Assured
Applicability For non-life insurance plans, including motor insurance, home insurance, health insurance, etc. For life insurance policies and guaranteed return plans
Benefit Indemnity benefits to reimburse or pay for the loss/damage occurred (no monetary benefit) Monetary benefit payable to the policy nominee or the insured
Nature of insurance policy Based on indemnity principle  Predefined insurance benefits

Sum Assured Vs Insured – Best Explained by BimaBandhu

The very fundamental reason to look forward to sum insured vs sum assured differentiation is to understand how this knowledge can benefit you in buying insurance policies. At BimaBandhu, we are dedicated to helping you know about the in-depth details of sum insured and sum assured, thereby helping you find the right policies at the right age.

FAQs

What is the difference between sum assured and sum insured?

Sum assured is related to life insurance policies while sum insured defines the benefit you can get under non-life insurance plans.

Is sum assured same as life cover?

To be very specific, sum assured is the value or amount of life cover you can choose while buying a suitable life insurance plan.

Is sum assured same as maturity value?

Maturity value refers to the benefit you will receive by the insurer once the purchased policy matures, hence the name. Sum assured, on the other hand, is the maximum amount your policy nominee can receive by the insurance company in case of your untimely demise

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