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Sum Assured in Unit Linked Insurance Plan

Sum Assured is the amount promised by the insurer to the policy holder's nominee. Click here to know more about the meaning of sum assured in ULIP.

Amit Raje
Written By :
Amit Raje

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.

Amit Raje
Reviewed By :
Prasad Pimple

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

Unit-Linked Insurance Plan (ULIP) is an insurance product that also offers investment opportunities. It is a type of linked plan where a portion of the premium is invested in different funds on the basis of the policyholder’s preference. A portion of your premium is invested toward your life insurance coverage, while the remaining amount is invested in equities, bonds, and other market-linked instruments.

There are various components of ULIP that include the sum assured, accrued bonuses, fund value, etc. Since ULIP offers both life insurance and growth on your investment, many people often get confused about what is sum assured in ULIP. Do you ever wonder how to calculate the money your family would receive in case you die during the policy period?

Let’s dive deep to know the details to understand what is the meaning of sum assured:

What is Sum Assured in ULIP?

The meaning of sum assured in insurance is the death benefit paid to the policy’s nominee in the unfortunate event of the insured person’s death. Please note that there is a direct relationship between premium amount and sum assured.

The higher the premium paid, the greater will be the sum assured. However, there is also an insurance element involved in such plans. Some people confuse this with the sum assured. To understand this, let’s compare ULIP with a term insurance policy.

Term Insurance Plan

In case of a term insurance plan, the sum assured is a predetermined amount that is specified in the policy document. The insurance company has to pay the sum assured to the nominee in the event of death during the policy term.

For instance, if you pick a term insurance plan with a sum assured cover of ₹1 crore, your loved ones will receive this entire amount in the unfortunate event of your demise within the policy term. Under this plan, there is no maturity benefit; therefore, the entire premium amount goes to covering the insured’s life. Therefore, a term insurance plan is cost-effective insurance that is known for a higher sum assured value.


In case of ULIP, the sum assured also includes the fund value at the time of claim settlement. Depending on the policy terms, the insurance provider can offer your nominee the sum assured or the fund value or the higher of the two.

In addition, ULIP also offers policyholder a death or maturity benefit, and the sum assured is paid after maturity. Along with the sum assured, policyholders get various other benefits such as a bonus which gets added to the sum assured after a few years of the policy.

How is the sum assured different from the fund value in a ULIP?

Many people find finance-related terminologies quite confusing. The difference between the “Fund Value” and the “Sum Assured” is one of the most misunderstood aspects. Keep scrolling through to get your concepts crystal clear!

The total value of your invested money at a given point in time is known as the fund value. It is determined as per the Net Asset Value (NAV) of your assets and is calculated by multiplying the NAV by the total number of units held. The sum assured is the predetermined amount of money that your loved ones will receive as a death benefit. However, the fund value keeps changing as per the fluctuations of the market.

Since ULIP serves two purposes, investment and insurance, there are two different payout components involved. While the “Sum Assured” comes into effect after the policyholder’s demise during the policy term, the “Fund Value” is paid out if the policyholder survives the policy period or surrenders their policy. Sum Assured is the minimum guaranteed death benefit paid out to the policyholder’s nominee/beneficiaries.

How Do You Get Paid in Case of ULIP?

The payment method in ULIP depends on the type of claim.

  • In case of a death claim: The nominee of the policyholder gets either sum assured or fund value whichever is higher.
  • In case of policy surrender: ULIPs have a 5-year lock-in period, after which you can surrender a policy. The insurance company will cut the surrender charges and pay you the fund value on the day of surrender. This will be calculated as per the NAV of your units.
  • In the case of policy maturity: The total fund value is paid to you at the time of maturity. This includes your invested capital, the returns on your investment, and any bonuses accrued over time.

Points to Know Before Investing in ULIP

Before investing, one needs to pay attention to a lot of detail. Below mentioned are a few pointers that you must note before investing in ULIPs.

  • Sum assured is a guaranteed amount that will be paid out to the policyholder’s family.
  • The minimum lock-in period of the policy will be five years.
  • The grace period for monthly premiums is 15 days and 30 days in all other cases.
  • If the policy is discontinued after 5-years, then the policyholder can revive the policy within two years.
  • Partial withdrawal of the policy is available after 5 years only.
  • For child policies, no withdrawal is allowed until the child attains the age of 18 years.
  • ULIPs offer multiple benefits. The investment decision should be taken from a holistic portfolio perspective in order to ensure that the policyholder can meet all their financial and security-related goals.

Now that you know the details regarding the sum assured in ULIP, you should make an informed decision before buying one. You can use the ULIP calculator to estimate what will be your sum assured.

- A Consumer Education Initiative series by Kotak Life

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Ref. No. KLI/22-23/E-BB/521