Life is unpredictable, and that's why it's crucial to have a safety net in place. Although there are many different insurance products available, term insurance has been a popular choice for many. However the term "sum assured" is frequently misinterpreted or ignored when it comes to term insurance. Don't make the error of ignoring this important element of your policy. We'll go deep into term insurance's sum assured in this article.

What is Sum assured?

Sum assured is the predetermined sum that a life insurance company, in exchange for premium payments made under a life insurance policy, promises to a policyholder or their legal heirs upon the occurrence of the insured event (The death of the policyholder during the policy period is the insured event in a term life insurance policy.)

How to calculate the sum assured?

Determining the sum assured for your policy may seem challenging, but it can be made easy with the help of a Human Life Value (HLV) calculator available online. By entering a few details such as your income, expenses, age, and other relevant factors, the calculator accounts for inflation and gives an estimate of the ideal sum assured required to cover your family's future expenses.

HLV provides two methods to determine the sum assured- income replacement-based and need-based. Income replacement provides coverage for the income your family requires, while need-based calculates the sum assured based on the family's monthly expenses until the life expectancy of the spouse or any other dependent member in the family.

Factors to consider while selecting the sum assured

When choosing a sum assured for your life insurance policy, several factors come into play. To determine the ideal sum assured amount, consider the following:

  1. The sum assured should cover all your financial responsibilities, such as your family's living expenses and your child's education or marriage.
  2. The sum assured should be enough to financially secure all your dependents, including your spouse, kids, and parents.
  3. The sum assured should be adequate to pay off any financial liabilities your family may face in your absence.
  4. Your age plays a vital role in determining the sum assured. If you're young, opt for a higher sum assured since you have a long life ahead of you.
  5. The sum assured should be affordable and not cause a financial strain on your pockets.

What is the Difference Between Sum Insured and Sum Assured?


Sum Assured

Sum Insured


The guaranteed amount that the insurer pays to the nominee in case of the policyholder's death during the policy term.

The maximum amount that an insurance company will pay to the policyholder in case of any covered loss or damage to the insured asset or person.


Mostly used in life insurance policies.

Mostly used in general insurance policies such as home insurance, health insurance, motor insurance, etc.


Calculated based on the policyholder's age, health, occupation, and other factors.

Calculated based on the value of the insured asset, the risk of damage or loss, and other factors.

Basis of payment

Lump sum payment to the nominee in case of the policyholder's death.

Reimbursement or payment of the actual expenses incurred up to the sum insured limit in case of a covered loss or damage.


The sum assured remains the same throughout the policy term.

The sum insured can be revised upon policy renewal based on the updated value of the asset or the insured person.



In conclusion, the sum assured is the most important aspect of a term insurance policy as it determines the financial protection for your loved ones. It is important to carefully evaluate your financial needs and choose a sum assured that provides adequate coverage for your family's future. Additionally, it is recommended to review and update your sum assured periodically as your financial situation changes. Ultimately, a term insurance policy with a suitable sum assured can provide peace of mind and financial security to your family in case of an unfortunate event.


Can the sum assured be changed after purchasing the policy?

No, the sum assured cannot be changed after purchasing the policy.

How is the premium amount related to the sum assured?

The premium amount is directly proportional to the sum assured. The higher the sum assured, the higher the premium amount.

Can the sum assured be increased or decreased after a claim?

No, the sum assured cannot be increased or decreased after a claim has been made.

Is sum assured same as maturity amount?

No, the sum assured is not the same as the maturity amount. The sum assured is the amount that is paid out in the event of the policyholder's death, whereas the maturity amount is the amount paid out at the end of the policy term.

Is sum assured guaranteed?

Yes, the sum assured is guaranteed and is mentioned in the policy document. The insurer is obligated to pay the sum assured in the event of the policyholder's death.