What is a Sum assured?
Sum assured is the guaranteed amount a life insurer pays your nominee on death (or on maturity, for some plans) — a fixed benefit, not a reimbursement of costs. In term insurance it is the pure protection amount your family receives. Choose it to replace your income and clear liabilities, not by premium alone.
A fixed benefit, not an expense reimbursement
Unlike health insurance's sum insured, the sum assured is paid in full on the covered event regardless of any 'cost'. In term plans, it is the money your dependents get to run the household and clear debts.
Sizing it well matters more than trimming premium: a sum assured that does not cover income replacement, loans and future goals leaves the family exposed exactly when it counts.
Example
A Rs 1 crore term-life sum assured is paid to the nominee on the policyholder's death, whatever the family's actual expenses are. The payout replaces lost income and clears the home loan.
Common mistakes
- Confusing sum assured (life, fixed payout) with sum insured (health, reimbursement up to a cap).
- Picking the sum assured to fit a premium budget instead of the family's real needs.
Frequently asked questions
How much sum assured do I need?
A common approach is enough to replace several years of income plus outstanding loans and major future goals, minus existing savings. It is about your family's needs, not a fixed multiple.
Is sum assured the same as maturity value?
In pure term plans there is no maturity value — the sum assured is a death benefit. Some savings-linked plans pay a maturity amount, which may differ from the death sum assured.