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Features
Ref. No. KLI/22-23/E-BB/492
Sum insured indicates the maximum payout for covered losses, while sum assured is specific to life insurance, representing the guaranteed amount payable to beneficiaries upon the occurrence of the insured event, such as death.
Insurance is a critical component of financial planning, providing individuals and businesses with a safety net in the face of unexpected events. Two essential terms in the insurance domain are “sum insured” and “sum assured.”
While the terms sum insured and sum assured might seem interchangeable, they have distinct meanings and implications in the context of insurance policies. Understanding the difference between the sum insured and the sum assured is crucial for policyholders to make informed decisions and ensure adequate coverage.
Sum insured is a term commonly associated with general insurance policies, such as health, motor, travel, and property insurance. It represents the maximum amount an insurance company agrees to pay in the event of a covered loss or claim. In essence, it is the predetermined financial limit specified in the insurance policy, beyond which the insurer is not liable to compensate the policyholder.
Sum insured vs sum assured are frequently used, often interchangeably, causing confusion among policyholders. However, these terms have distinct meanings and are associated with different types of insurance policies.
Feature |
Sum Insured |
Sum Assured |
Associated Insurance |
General Insurance Policies (e.g., Health, Motor, Travel, Property) |
Life Insurance Policies |
Definition |
Maximum amount insurer pays for covered loss/claim |
Guaranteed amount paid to beneficiaries |
Flexibility |
Policyholder choice; adjust based on needs |
Fixed; remains constant throughout the policy term |
Annual Review |
Subject to annual review; adjustable |
Fixed; not subject to change |
Payment Circumstances |
Pays out in case of covered loss or claim |
Pays out upon the death of policyholder or maturity |
Common Examples |
Property damage Medical expenses Travel emergencies |
Death benefit Maturity benefit |
Sum assured is a term primarily associated with life insurance policies. It is the guaranteed amount that the insurance company commits to pay to the beneficiaries in the case of the policyholder’s death or the maturity of the policy. It provides a predetermined financial benefit, serving as the foundation of the life insurance contract.
Sum insured refers to the maximum amount an insurer is liable to pay in the event of a covered loss or claim. Understanding the key features of the sum insured is crucial for policyholders to make informed decisions and ensure adequate protection.
Policyholders often have the flexibility to choose the Sum insured based on their needs, preferences, and risk tolerance. Higher sums insured generally lead to higher premiums but also provide greater financial protection.
The amount of sum insured can be subject to annual review, allowing policyholders to adjust their coverage based on changing circumstances, such as inflation or increased asset values.
Sum insured is commonly used in property and casualty insurance, where coverage is provided for specific assets or against specific risks, such as damage to a car or a house.
Sum assured holds significant importance, representing the guaranteed amount that an insurer commits to pay in the event of a claim. To ensure that you can have the right level of coverage and financial protection, take a closer look at these key features of sum assured.
Sum assured ensures a fixed and guaranteed payout to the beneficiaries, regardless of the performance of the underlying investment components of the policy.
Life insurance policies are often long-term commitments, and the sum Assured remains constant throughout the policy term, providing stability and predictability.
In the case of the policyholder’s demise during the policy term, the Sum Assured is paid out to the beneficiaries, offering financial support during a challenging time.
Understanding the basics of sum insured and sum assured is vital for anyone deciding to buy an insurance plan. While sum insured is prevalent in general insurance policies, offering financial protection against various risks, sum assured takes centre stage in life insurance, providing a guaranteed payout to beneficiaries. As insurance needs vary, selecting appropriate sums insured or assured requires careful consideration of individual circumstances, financial goals, and risk tolerance. By grasping the difference between these terms, policyholders can make well-informed decisions to secure their financial well-being.
1
Sum insured is the predetermined financial limit specified in general insurance policies, such as health, motor, travel, and property insurance. It represents the maximum amount an insurer agrees to pay in the event of a covered loss or claim.
2
Sum assured is commonly associated with life insurance policies. It represents the guaranteed amount that the insurance company commits to pay to the beneficiaries in the event of the policyholder’s death or the maturity of the policy.
3
Sum insured offers flexibility to policyholders who can adjust the amount based on their changing needs, preferences, and risk tolerance. In contrast, the sum assured remains fixed throughout the policy term, providing stability and predictability.
4
Yes, the sum insured is often subject to annual review. This allows policyholders to adjust their coverage based on changing circumstances, such as inflation or increased asset values, ensuring that the coverage remains adequate.
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Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.
Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors
Features
Ref. No. KLI/22-23/E-BB/2435
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
