Sum Assured and Sum Insured: Do you know the difference?
Whenever someone talks about insurance policies, they would surely mention these at least once in their sales pitch: Sum Assured or Sum Insured. Both of the terms are fundamental to the protection provided by insurance policies to mitigate the financial burden on the policyholders or their family. However, someone unfamiliar with these terms might think of them as the same. They differ significantly in their form and features. For someone who wants to buy an insurance policy of any kind: Life insurance, term insurance, motor insurance, cyber liability insurance etc., it is vital to know the difference.
Sum Assured: All you need to know
Sum assured is a pre-decided payout that the insurance company pays to the policyholder if the insured event mentioned in the policy occurs. Sum assured is unique to life insurance policies and term insurance policies as they offer a pre-defined lump sum amount as their core benefit.
For example, suppose you have life insurance or a term insurance policy with a sum assured of 50 lakhs. In that case, the insurance company will pay the assured amount (50 lakhs) to the nominees, in the event of the policyholder’s demise. Policies with sum assured do not take the actual money spent into consideration and pay the pre-defined amount regardless. With sum assured, it is a general rule that the higher the sum assured, the higher the payable premium.
Sum Insured: All you need to know
Sum Insured is the payable amount that the insurance companies pay to the policyholder to cover the expenses of any injury, damages or repairs. Sum insured is unique to non-life insurance policies such as motor insurance policy, cyber liability insurance, health insurance etc. The process of sum insured work on the principle of indemnity where the insurance policy only pays an amount that is at par with the actual financial loss incurred by the policyholder.
For example, suppose you have a health insurance policy with a sum insured of 3 lakhs. In that case, the insurance company will pay any hospitalisation or medical expenses incurred by the policyholder up to Rs 3 lakhs. If the bill exceeds the sum insured amount, the policyholder is liable to pay the amount over 3 lakhs personally.
Dual Benefit Insurance Policies: The mix of sum assured and sum insured
In general, traditional life insurance policies offer the benefit of sum assured, and non-life insurance policies offer the benefit of the sum insured. However, innovative insurance brokers and insurance companies make it possible for the policyholders to avail dual benefits in a single policy through add-ons or riders. Such riders, along with providing a one-time payment can also reimburse the policyholder for all the medical expenses incurred.
For example, a policyholder can add a critical illness insurance cover to both life or non-life (health insurance) insurance policies. A critical illness cover can provide a one-time payout if the policyholder is diagnosed with a pre-defined illness. Other examples of such plans are daily hospital cash, accidental cover, surgical benefit etc.
Be it insurance policies with sum assured or sum assured, they all are critical in protecting a policyholder against unforeseen events and eventualities. Depending on your lifestyle and financial situation, you should consult an insurance broker about buying the most comprehensive insurance policies with adequate sum assured and sum insured.
You can also look to create an all-inclusive insurance plan by adding dual-benefit add-ons or riders. PINC Insurance is an ideal insurance platform that offers all types of insurance policies to cater to your insurance needs. You can visit PINC Insurance to consult with the insurance experts in detail and buy a complete and suitable insurance package.