What Is the Difference Between Sum Assured And Sum Insured?

Sum assured and sum insured though seem to mean almost the same are different concepts in insurance. To underline the difference, first we will understand the two terms separately:

Sum assured: The concept of sum assured value applies to life insurance policies. It is the pre-determined benefit that is decided at the time of policy purchase, which is payable to the policyholder or nominee as the case may be, by the insurer in case the insured event occurs. It is against this sum assured value, the premium has to be serviced by the policyholder.

On payment of the sum assured value by the insurer, either during the policy tenure or maturity or when the claim is made, the policy stands terminated.

Can you increase the sum assured value in a Term insurance plan?

Sum insured: The concept of sum insured on the other hand in an insurance policy works on the principle of indemnity that works to provide a cover or compensation for the damage or loss. This said such policies do not provide any monetary benefit to the policyholder and the damage is covered up to the extent of insured value.

Let us understand this with an example: Say you own a motor insurance for your 4-wheeler which has a sum-insured value of Rs. 50,000 but the damage caused in an accident results in a repair cost of Rs. 60,000 then the insurer is liable to pay only the insured value of Rs. 50,000. Remaining Rs. 10,000 has to be paid-off from your pocket.

There can also be a case when you have a health insurance policy of say sum insured Rs. 1 lakh and in a case when you are hospitalized an expenditure of Rs. 25000 is incurred, then the general insurer will pay the entire amount.

The Difference- Sum assured vs Sum insured

1. Sum assured applies to life insurance policies where as general insurance policies including health, motor and household insurance come with sum insured value.

2. Another important difference is that while in case of sum assured value entire pre-determined benefit amount is payable irrespective of the damage meted at the time of claim. Sum insured value pays only to the extent of the damage i.e the covered individual is not provided any kind of monetary benefit or the exact damage amount is covered for provided the sum insured value is higher or equal to this value.

3. It is easy to ascertain a sum insured value that compensates or reimburses the insured loss as against deciding sum assured value on a life of a proposed policyholder.

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