Contents
What is Sum Assured?
The sum assured is the guaranteed amount the insurer contractually pays the nominee on the policyholder's death (in life insurance) or on a covered event (in health/general insurance). It is the floor of the payout — bonuses, riders or accrued benefits sit on top.
Sum Assured vs. Cover Amount
In term insurance the two are identical. In an endowment or ULIP, "cover" may mean sum assured + accumulated bonuses + fund value; sum assured is the irreducible guaranteed component. Always check the policy bond, not the brochure.
How Much Cover Do You Need? (Indian guidance)
- 10x annual income — minimum benchmark for working professionals
- 15-20x annual income — if you have young children, large loans or a non-earning spouse
- Liabilities + 10 years of household expense — Human Life Value (HLV) approach
Worked Example
A 35-year-old earning Rs 18 lakh/year with a Rs 60 lakh home loan and two children (ages 4 and 7) needs roughly: Rs 60L (loan) + Rs 18L x 15 = Rs 2.7 cr + Rs 30L (kids' education) = Rs 3.6 crore sum assured. Premium for a 30-year term: ~Rs 30,000-35,000/year.
IRDAI Note
For tax-free maturity under Section 10(10D), sum assured must be at least 10x annual premium (policies issued on or after 1-Apr-2012).
Educational only — not advice. ARN-314872.