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Sum Insured vs Sum Assured: Key Differences

Sum Insured vs Sum Assured: Key Differences
February 16, 2024


Perhaps the most fundamental terms used in the insurance domain that many individuals tend to confuse and use interchangeably are Sum Assured and Sum Insured. 

For anyone considering life insurance plans, understanding the insurance terms ‘sum insured vs sum assured’ is crucial. In evaluating a plan, it is important to note these terms differ significantly, even though beginners may confuse them. While both may sound similar, they are two different terms with different meanings that an individual needs to understand before buying insurance. The "sum assured" refers to the benefit provided, whereas the "sum insured" refers to the reimbursement for the loss covered by the policy.

What is Sum Assured?

Life insurance plans need to have a specified sum assured. It is the predetermined amount the insurance company must pay either to the life assured at the end of the policy term or to the nominee/beneficiary upon the policyholder's death, as stated in the policy documents. Premiums paid by policyholders to insurers are dependent on the total sum assured. A higher life cover (sum assured) means a higher insurance premium.

How to Calculate Sum Assured? 

Consider the following factors when determining your plan's sum insured:

  • To ensure complete compensation for any loss or damage, base the sum insured on the asset's value.

  • When choosing health insurance, choose an amount that will cover emergency medical expenses.

  • Take into consideration your present annual income, outstanding financial obligations, expenses, and debts/loans.

  • Make sure the sum insured is future-proofed by taking the impact of inflation on savings into account.

  • Make sure the sum insured amount is within your budget. 

What is Sum Insured? 

The sum insured term is applicable in the case of general insurances such as health insurance, motor insurance, home insurance, etc. Such policies work on the principle of indemnity which provides compensation or cover in case of any damages, loss, or injury to the insured asset.

The idea behind the Sum Insured concept is to ensure that there are no monetary benefits made by the policyholders and only their losses are covered. The total cover provided for the non-life insurance policies is known as the Sum Insured.

If you are the sole breadwinner of the family, it is vital to buy life insurance with the sum assured that would suffice to take care of the current and future expenses of your family members. Increasing inflation and lifestyle expenses can impact the total amount you need as life cover.

Difference between the Sum Insured and Sum Assured


Sum Insured

Sum Assured

Policy relevance

Policies that are not life insurance related, such as motor, home, health insurance, etc.

A term insurance plan, a savings plan, or any other type of life insurance. 

The nature of the policy

As a result of the indemnity principle, reimburses the lost or damaged amount 

As part of the policy's maturity, a fixed amount is paid and pre-specified by the insurance company in the event of death.

Policy benefits

There is no monetary benefit. The amount of damage or loss is the only amount to be reimbursed. 

Nominees or insured persons receive financial benefits. For example, guaranteed return insurance policies which offer life cover, as well as investment benefits


Choosing the right amount for your plan and needs requires understanding the differences between "sum assured" and "sum insured". Make informed decisions about your future by selecting the right sum assured.

Also Read: 4 Common Mistakes to Avoid When Planning to Buy Term Insurance

HDFC Life offers Human Life Value (HLV) calculator, a user-friendly online tool that helps secure your family’s future. It determines the ideal sum assured based on the basic details such as your current age, desired retirement age, educational qualification, and the details of your finances such as annual income, monthly expense, liabilities, etc.

Visit the HDFCLife.com website to calculate the ideal sum assured and know your Ideal Life Cover' using the Human Life Value Calculator

FAQs on Sum Insured vs Sum Assured

Q: What is the difference between assured and insured?

When it comes to life insurance coverage, "assured" represents the person covered, while "insured" refers to the policy itself.

Q: What is the difference between sum assured and sum assured on death?

The sum assured in a life insurance policy refers to the benefits paid out, while the sum assured on death refers to the benefit paid upon the death of the policyholder.

Q: Are the benefits of a policy linked more to sum assured or sum insured?

Sum assured refers to the amount specified under the terms of the policy that constitutes the benefits of the policy.

Q: What is the significance of sum assured and sum assured in financial planning?

The sum assured and sum insured play an important role in financial planning due to the fact that they determine the coverage or benefits provided by insurance policies, affecting the overall financial plan.

Q: Is sum assured available in non-life insurance policies?

Life insurance policies include sum assured, while non-life policies include sum insured.

Q: Is the sum insured available in life insurance policies?

A life insurance policy's sum insured determines the amount of coverage provided in the event of death.

Q: Is it possible to change the sum insured amount?

Certain insurance policies allow for changing the sum insured amount, subject to the policy's terms and conditions.

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ARN - ED/02/24/8586

Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Author Profile Written By:
Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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We at HDFC Life are committed to offer innovative products and services that enable individuals live a ‘Life of Pride’. For over two decades we have been providing life insurance plans - protection, pension, savings, investment, annuity and health.