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Sum Insured Vs Sum Assured: Know the Difference

Insurance helps protect your future but understanding insurance terms can sometimes be confusing. One common confusion is the difference between sum insured and sum assured. Though they sound similar, they have different meanings. Sum insured is related to protection against specific losses in general insurance plans like health, motor insurance etc. Meanwhile, sum assured is a guaranteed* payout given under life insurance policies. Read More

In this blog, we will explain what is sum assured in life insurance and what is sum insured in general insurance in very simple words. We will also examine both terms, their essential aspects and calculation methods that affect your insurance policy. Read Less

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Written ByShruti gujarathi
AboutShruti gujarathi
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Shruti gujarathi has 5 years of experience in the BFSI sector, and as Manager- Digital Marketing at Bajaj Allianz Life Insurance, manages digital and content marketing. She has had hands-on experience in content strategy, performance marketing and Strategic Alliances over a career spanning 10 years.
Reviewed ByRituraj Singh
AboutRituraj Singh
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Rituraj Singh,With over 6.5 years of experience in the insurance industry, Rituraj Singh, Manager- Product & Brand Marketing at Bajaj Allianz Life Insurance overlooks new product launches, compliance, and brand projects, leveraging artificial intelligence and technology to enhance outcomes.
Written on: 30th May 2025
Modified on: 02nd June 2025
Reading Time: 15 Mins
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What is Sum Assured?


After purchasing a life insurance policy from an Insurer, your nominees will receive a specific predetermined amount in case of your untimely death during the policy term. This specified amount given under a life insurance contract by the Insurer to the nominees in case of the death of the life assured during the policy tenure is known as the sum assured.


A life insurance policy delivers financial protection to your family helping them manage their expenses after your passing.


Key Features of Sum Assured


Here are the important features of the sum assured:


  • Fixed Benefit: No change in the amount paid as decided, gives you peace of mind.
  • Financial Security: Helps family maintain their lifestyle after your demise.
  • Stable Premium: Premium is based on the chosen sum assured and remains stable.
  • No Annual Change: The sum assured remains the same throughout the policy term.
  • Tax Benefits: Premiums paid towards life insurance qualify for tax benefits under Section 80C (under old tax regime), and the payout is tax-free under Section 10(10D) (subject to prevailing tax laws).

How to Calculate Sum Assured?


Choosing the right sum assured is important to make sure your family can maintain their lifestyle if you are not around. Here’s how you can calculate it:


  • Think about your family’s daily living expenses, child’s education, and future goals etc.
  • Include your home loan, car loan, or any personal loans that need to be paid off.
  • Consider big future costs like weddings, higher education etc.
  • Prices rise over time, so choose a sum assured that can cover future costs too.

Tip: A good rule is to choose a sum assured that is 10 times your annual income.


What is Sum Insured?


Non-life insurance coverages such as health, motor, home and travel insurance etc, utilize sum insured as one of their main elements. An insurance company will pay the sum insured as the maximum benefit when you experience a loss of the things covered or make a claim.


The sum insured primarily protects your assets as well as your health and property from losses. This coverage scope reaches up to the damaged expenses, yet extends no further beyond the declared amount.


Key Features of Sum Insured


Understanding the key features of sum insured helps you choose the right insurance:


  • You can choose your sum insured based on your needs, and it can change during policy renewal.
  • The insurer only pays up to the extent of the actual loss.
  • It protects your valuable assets like your house, car, or health etc.
  • You can review and update your sum insured yearly.
  • Higher sum insured usually means a higher premium, but better protection.

How to Calculate Sum Insured?


When selecting the sum insured, you should be practical. Here’s how you can do it:


  • Asset Value: For home or car insurance, select a sum insured close to the market value of the item.
  • Healthcare Costs: For health insurance, estimate the cost of treatments at good hospitals.
  • Family Size: For a family health plan, select a sum insured that covers all members.
  • Lifestyle: If you travel often, you may need a higher sum insured for travel insurance.
  • Inflation Factor: Medical and repair costs rise, so keep a margin when deciding.

Difference Between The Sum Assured and Sum Insured


Let’s now clearly understand the difference between sum insured and sum assured with the help of a simple table:


Feature


Sum Assured


Sum Insured


Type of Policy


Life Insurance


General Insurance (Health, Motor, Home etc)


Meaning


Fixed amount given on death or maturity


Maximum coverage limit for losses


Basis


Pre-agreed fixed payout


Actual loss covered up to the limit


Payout Condition


Death of life assured during policy term or maturity


Loss or damage event


Changeability


Fixed throughout the policy term


Can be reviewed annually


Benefit Type


Monetary benefit to the nominee


Compensation for actual loss


Both are important, but they work differently based on the type of policy you have.


Conclusion


Choosing the right insurance cover is very important for your financial security. Understanding the difference between sum insured and sum assured can help you make smarter choices when buying a policy.


The sum insured meaning is linked to protection against actual losses in general insurance, like health, motor, and property insurance etc, based on policy type. Whereas the sum assured is as a part of life insurance policies which is obtained by the nominee on death of the life assured within the policy term.


Your ability to safeguard loved ones and assets improves after understanding the distinction between sum assured in life insurance and sum insured in general insurance. You must carefully choose your life insurance sum assured and the sum insured for your health or assets etc. Both insurance amounts should be carefully decided based on your current lifestyle, family requirements and your future objectives.


Informative choices will create financial stability for your future.


FAQs


What does the term ‘sum insured’ mean, and why does it matter in insurance?


Sum insured is the maximum amount of money that an insurance company agrees to pay the policyholder in case of a covered loss or claim. It represents the limit of coverage under an insurance policy. The sum insured is very important because it shows the maximum amount the insurance company will pay in case of loss to aspects covered under general insurance.


Which type of insurance policy usually includes a sum assured?


The sum assured is found in life insurance policies. It is the fixed amount of money your nominee will get in case of your untimely demise.


Is the sum insured reviewed every year, and if so, why?


Yes, the sum insured is reviewed every year when you renew your general insurance. It is reviewed because costs like hospital bills or house repairs become more expensive every year. So, by adjusting the sum insured, you can make sure you have enough protection even when prices go up.


Is ‘sum assured’ applicable to non-life insurance coverage?


You cannot find the term sum assured in the general insurance plans such as health, motor insurance etc. Sum assured is a term used for Life insurance plans , it is the predetermined fixed amount paid to the nominee in case of death of the life assured within the policy term.


Do life insurance policies include a sum insured?


In life insurance, you would not find sum insured, however, the predetermined amount fixed for payout in life insurance is referred to as the sum assured. The term sum insured is used general insurance plans such as in health insurance, motor insurance etc.


Can the sum insured amount be modified?


Yes, you can change your sum insured amount when you renew your insurance policy every year. You might want more coverage if your family grows or their financial goals change or hospital costs rise etc. Changing the sum insured gives you flexibility to match your protection needs with your changing life situation.


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The views stated in this article are not to be construed as investment advice and readers are suggested to seek independent financial advice before making any investment decisions. For more details on risk factors, terms and conditions please read the sales brochure & policy document (available on www.bajajallianzlife.com) carefully before concluding a sale. Bajaj Allianz Life Insurance Company Ltd., Regd. office Address: Bajaj Allianz House, Airport Road, Yerawada, Pune - 411006, Reg. No.: 116, CIN: U66010PN2001PLC015959, Call us on toll free No.: 1800 209 7272, Mail us: customercare@bajajallianz.co.in

Tax benefits as per prevailing Section 80C (under old tax regime) and Section 10(10D) of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy

*Conditions Apply – The Guaranteed benefits are dependent on policy term, premium payment term availed along with other variable factors. For more details please refer to sales brochure.

BJAZ-WEB-EC-15338/25

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*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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%%Above illustration is for Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V03) considering Male aged 25 years | Non-Smoker | Policy Term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 1,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 6,238. 2nd Year onwards premium is Rs. 6,659. Total Premium Paid is Rs. 1,99,349 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly installments (Lumpsum Payout Percentage : 45, Income Payout Percentage : 55) | Premium shown above is exclusive of Goods & Service Tax/any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only. This is inclusive of all the discounts mentioned above.

##Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

@Term Insurance plan bought online directly from Bajaj Allianz Life Insurance has no commissions involved.

^^The Return of Premium amount is total of all the premiums received, exclusive of extra premium, rider premium and GST & /any other applicable tax levied, subject to changes in tax laws
Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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Disclaimer

Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V04)

*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116


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