Sum Assured is the guaranteed amount that an insurance company promises to pay to the policyholder or nominee in case of a claim event, such as death or policy maturity.
Sum Assured is a key concept in life insurance policies, representing the minimum guaranteed payout by the insurer. It is decided at the time of purchasing the policy and remains fixed throughout the policy term (unless specified otherwise).
In a term insurance plan, the sum assured is paid to the nominee if the policyholder passes away during the policy term. In other types of insurance (like endowment or ULIP), the payout may include the sum assured along with bonuses or investment returns.
Choosing the right sum assured is important for financial protection. It should ideally cover family expenses, liabilities, loans, and future goals like children’s education. A higher sum assured provides better security but may result in higher premiums.
It is important to note that sum assured is different from sum insured, which is commonly used in health insurance.
"If a person buys a life insurance policy with a sum assured of ₹50 lakh, the nominee will receive ₹50 lakh in case of the policyholder’s death during the policy term."