AAROGYA CARE

Sum Insured and Sum Assured: How Are They Different From Each Other?

Sum insured is applicable to insurance products like health and motor

Sum assured is used in reference to investing in a life insurance plan

This is the difference between sum assured and sum insured

B
Bajaj Finserv Health
October 4th, 2021
7 mins read

While investing in insurance policies is the need of the hour, you need to understand the nuances before you sign up. Be it health insurance or life insurance, getting your basics right is essential. Understanding the technicalities helps you get a clear idea of different terms and conditions of your policy.

Some of most common terms used are sum insured and sum assured. Both of these are vital when it comes to an insurance policy. Knowing sum insured vs sum assured is important as these components determine the total coverage of your insurance plan. However, in most cases, these terms are used interchangeably and confused for one another. Do they mean the same thing? No, they don’t.

To understand more about what the sum insured amount refers to and the difference between sum assured and sum insured, read on.

Additional read: 5 Tips to Buy the Best Family Health Insurance Policy

What is sum insured?

Sum insured in insurance is the coverage you get for any loss, damage or injury. This works on the basis of the indemnity principle, where your insurance provider pays you a compensation for the loss occurred. Getting a cover like this helps you tackle unexpected medical expenses or manage unforeseen circumstances such as theft and vehicle damage.

Be it health insurance, home, medical or motor insurance, sum insured is used for insurance products that are not life-related [1]. However, the benefit you get is not monetary and is a reimbursement of expenses borne by you during a particular crisis. For instance, if your expenses are equal to or less than the sum insured, your insurance provider reimburses the complete amount. In case your expenses exceed the sum insured, you will have to bear additional costs yourself. In simple terms, the sum insured definition can be explained as the compensation amount paid by your insurance company in the event of loss, injury or hospitalization.

how to choose sum insured

Now that you are familiar with the sum insured meaning, you need to understand why choosing the right sum insured amount is important. While this amount helps you manage your medical expenses with ease, it also helps you boost your financial health. Choosing a higher amount for the sum insured can help you tackle a crisis without disrupting your savings. In case you opt for a family floater plan, where your immediate family members are covered under a single coverage, opting for a higher sum insured amount is essential. This way multiple claims can be managed throughout the year to ensure all members included in policy get proper coverage.

Sum insured is dependent on certain factors such as your age, lifestyle and health ailments, when it comes to a health policy. Consider all of them before you choose the sum insured amount. The premium you need to pay while availing a plan also depends on the sum insured. If you choose a higher amount for sum insured, your premium will also be higher.

What is the sum assured?

Sum assured in life insurance is the monetary benefit you receive at the end of your policy term. This is the total coverage that you have selected while investing in a life insurance policy [2]. Sum assured is a pre-fixed amount given by your insurance provider either to you or to your nominee in your absence. This amount remains unchanged and is applicable only to life insurance policies. For instance, if you have taken a policy with a sum assured of Rs.15 lakhs, your nominee will be given the assured sum if something happens to you.

Like the sum insured, even the sum assured has a direct impact on your premium amount. If you choose a higher sum assured, you’ll have to pay a higher premium annually, monthly or quarterly.

Before choosing the sum assured, consider some of these factors. 

  • Take into account your financial responsibilities so that sum assured amount is enough to meet the expenditure of your family in case the unforeseen happens. 
  • Consider your age and the number of dependents in your family prior to selecting the sum assured amount.
  • Keep a note of your existing liabilities and assets so that the family’s finances can managed with ease.
  • Check if your premium amount is affordable before deciding the sum assured.

What is the difference between sum insured and sum assured?

SUM INSURED SUM ASSURED
Applicable for non-life insurance products such as health and motor insurance Applicable for life insurance policies
Provides compensation for loss or hospitalization as per the indemnity principle Pre-determined amount paid during event of death or after the policy term ends
There are no monetary benefits There are monetary benefits

Additional read: How to Choose the Perfect Medical Coverage for Your Health Insurance Policy

Now that you are aware of these important terms, choosing the sum insured and sum assured amount becomes easier. Whether it is life insurance or health insurance, invest in a plan that best suits your requirements and pockets too.

Browse through a range of rewarding healthcare plans of Aarogya Care on Bajaj Finserv Health. With a claims ratio that outdoes competitors along with other features like preventive health packages, free doctor consultations and cashless claims, they can help you prioritize healthcare and avail medical treatment affordably.

Please note that this article is solely meant for informational purposes and Bajaj Finserv Health Limited (“BFHL”) does not shoulder any responsibility of the views/advice/information expressed/given by the writer/reviewer/originator. This article should not be considered as a substitute for any medical advice, diagnosis or treatment. Always consult with your trusted physician/qualified healthcare professional to evaluate your medical condition. The above article has been reviewed by a qualified doctor and BFHL is not responsible for any damages for any information or services provided by any third party.

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