Definition
Sum Assured
Sum assured is the guaranteed amount an insurer pays to the policyholder or nominee on the occurrence of the insured event.
The sum assured is the fixed, guaranteed payout promised under an insurance policy — for a life policy, the amount the nominee receives on the policyholder's death; for some health and other policies, the maximum cover. It is the core of the protection you are buying.
It differs from the sum insured in health policies (which is a yearly cover limit) and from any bonuses that may add to a participating life policy's payout. For term insurance, choosing an adequate sum assured — typically a large multiple of your annual income — is the most important decision.
Under-insuring is a common mistake: people pick a sum assured based on affordable premiums rather than their family's actual needs, leaving dependants under-protected.
Related terms
- RiderA rider is an optional add-on to an insurance policy that provides extra coverage for a small additional premium.
- Claim Settlement Ratio (CSR)The claim settlement ratio is the percentage of claims an insurer settles out of the total claims received in a year.
- Term InsuranceTerm insurance is pure life cover that pays your family a large sum if you die during the policy term, in exchange for a low premium.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.