The terms sum assured and sum insured through sound almost the same are two intrinsically different notions. Many times people tend to use these terminologies interchangeably but it is inaccurate to do this. Let’s find out how these seemingly similar words differ.

## Sum Insured

Sum insured is the amount of money that is paid to the policyholder as reimbursement if an insured event happens. It is a pre-decided term in the contract and is paid if either the insured event happens or the policy term matures.

For example, if an individual has health insurance and gets into an accident, the medical expenses of his/her hospitalization will be covered by the insurance company up to the value of the sum insured.

If the bill exceeds the value of the sum insured, the policyholder will himself have to take care of the rest of the cost. This concept is based on the principle of indemnity i.e. compensation for loss or damage.

## Sum Assured

In life insurance policies, the insurance company covers the life of the policyholder, and in the event of his/her death, the nominees of the policy are paid a certain amount. This amount is known as sum assured. It is a predetermined amount and is paid if the insured dies within the policy tenure.

## The Difference

**Type of policy:** Sum assured is a concept applicable in life insurance policies. Alternately, the sum insured is the amount of money paid as compensation in non-life insurance policies such as car insurance, health insurance, etc.

**Nature:** Sum assured is a fixed amount that is paid in its totality if the policyholder dies. Whereas, sum insured works on the principle of indemnity, and the cover is paid up till the amount of the damages. Although the sum insured also has an upper limit, only the loss is remunerated whenever it is lower than the cap limit.

**Calculation:** The value of the sum assured is based on the cover amount that the individual chooses at the time of buying the policy. However, the value and condition of the asset being insured is a factor in calculating the sum insured.

**Beneficiary: **The policyholders themselves are directly or indirectly benefited by the sum insured. For instance, in the case of car insurance, the cost of theft/damage of the car is recompensed to the insured directly. Instead, the beneficiary is the nominee based on the policyholder’s discretion in the matter of sum assured.

Thus, both sum assured and sum insured are relatively different concepts. Though it can be confusing to differentiate between the two, the above information is intended to facilitate you in getting a better grasp of their respective meanings.