Difference between sum assured and sum insured for term insurance

When you start earning, your priority would be to create a corpus with enough savings for your family. This will help them manage the cost of living in your absence. However, savings alone may be insufficient as they might get exhausted during emergencies. Savings may also not help in fulfilling future goals in your absence. Hence, you need to invest in good term insurance, which would provide your family with additional financial assistance.

This assistance is known as the sum assured in a term plan. However, there is also the term 'sum insured' which is also related to providing financial assistance to the policyholder. What is the difference between the sum assured and the sum insured? Keep reading to find out.

Understanding what a term plan is

When looking for different types of life insurance policies, many people wonder: what is term insurance? It is a type of life insurance that, as the name suggests, comes with a term. The terms offered are 5, 10, 15 and 20 years. Some insurers might offer policies up to 30 years as well. If the policyholder were to suddenly pass away during the policy term, their dependents will be compensated with a sum assured as per the policy. There are different types of term plans which provide different benefits to the policyholder.

What is the sum assured?

Sum assured is a term associated with life insurance policies, e.g., term insurance policy. The sum assured is the amount that the insurer agrees to pay to the dependents, i.e., the family of the policyholder if something unfortunate were to happen to them during the term of the policy. In some policies, the sum assured is also paid at the end of the policy term. The amount of the sum assured is dependent on the policy you purchase. Do keep in mind that the premium you pay towards the policy is dependent on the amount of sum assured you choose.

There are different factors that go into deciding the amount of sum assured you require. Factors such as your income, your life goals, the number of dependents, and your age are some vital factors. Opting to invest in a life insurance plan early on can enable you to go for a higher sum assured rather than going for it at a later stage. When looking to purchase a life insurance policy, such as a term plan, you can use the term insurance calculator to see how much your policy would cost based on your sum assured requirements.

What is the sum insured?

Sum insured is a term associated with non-life insurance policies, i.e., general insurance policies. Sum insured is the amount of financial compensation that the policyholder gets from the insurer for damages caused to property or for any injuries caused to the policyholder. General insurance policies such as health insurance, car and bike insurance, or home insurance offer a sum insured to the policyholder. 

For example, if your home is insured with home insurance and it gets damaged due to fire, your insurer will compensate you with the sum insured amount. This amount is based on the agreement between you and the insurer. If the sum insured amount was Rs.2 Lakhs, you will be compensated for that much amount only. If the cost of damage exceeds more than the sum insured, the rest will have to be covered by you.

How is the sum insured calculated?

As different policies are used to insure different assets, the amount of sum insured you need is dependent on the type of policy you are buying. In health insurance, going for a higher sum insured helps in covering major costs of medical emergencies. If you want to insure your car or bike, taking its value into consideration helps in deciding the sum insured amount. The same principle applies to home insurance as well. 


These are the differences between sum assured and sum insured. When you plan on purchasing term insurance, do remember that you get a sufficient sum assured in the policy. For any other information or query, do get in touch with your insurance advisor.

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