Definition
Sum Insured (Health)
Sum insured is the maximum amount a health (or general) insurer will pay for claims in a policy year, acting as the ceiling on indemnity.
Unlike the life-insurance sum assured, which is a fixed benefit paid on a defined event, the health sum insured is an indemnity limit: the insurer reimburses actual covered expenses only up to this cap during the year. It can be on an individual basis or shared in a family floater.
Given medical inflation, choosing an adequate sum insured is critical to avoid underinsurance; many Indians under-buy. Features like restoration and cumulative bonus effectively stretch the sum insured, while super top-ups are a cheap way to raise the overall ceiling.
Related terms
- Restoration BenefitRestoration (or recharge) benefit automatically reinstates the health policy's sum insured once it is exhausted during a policy year, providing fresh cover for further claims.
- Family FloaterA family floater is a single health policy with one shared sum insured covering the whole family, instead of separate sums for each member.
- UnderinsuranceUnderinsurance is holding a sum insured lower than the actual value at risk, leaving the policyholder to bear part of any loss.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.