Contact us

To Buy: 1800-258-5899 (9:30 AM to 6:30 PM)


For Existing Policy: 1800-103-0003/ 1800-180-0003/ 1800-891-0003



Locate Branch



Search Button

What is Sum Assured?

dateKnowledge Centre Team dateJuanuary 17, 2023 views684 Views
Sum Assured in Life Insurance Plan

Life insurance provides a financial safety net to help you take care of your loved ones in case of your unfortunate demise. If you are the primary breadwinner, your family depends on you financially for a living standard and a safe future.

When you buy a life insurance, sum assured becomes that banking rock which, will keep your family afloat and secure their future in your absence. This makes it crucial to understand the meaning of sum assured and how it works.

What is the Meaning of Sum Assured?

A sum assured is the minimum guaranteed benefit amount the insurer will pay to your nominee in the unfortunate event of your demise during the policy tenure. You can choose your life insurance sum assured amount at the time of buying the policy. Choosing a correct sum assured is important in life insurance policies like term insurance.

Along with the sum assured, you can also select the way that amount is paid to your nominee or nominees. At the time of buying the policy, you can select the payout frequency as a lump sum or pay in regular monthly income or a combination of both.


The sum assured of your policy has the most significant impact on your policy premium. It should keep up with your income and lifestyle. Plans like iSelect Smart360 Term Plan give you the option to block your premium and increase the sum assured within 5 years of buying the policy.

Ideally, you need to maintain a life insurance sum assured equal to 10 times your annual income. Otherwise, you can also buy a new term policy to raise the total life cover sum assured and keep up with your income.

How to Calculate your Sum Assured?

You can calculate the sum assured amount that you need by using Human Life Value (HLV). It helps you determine the ideal amount required for your family’s financial needs. There are two methods to calculate the sum assured using HLV.

Income Replacement Based In this method, whatever income your family needs for support is covered by a sum assured.

Sum Assured = Annual Income * Years left until Retirement
Need-Based In this method, the sum assured is calculated based on the family's monthly expenses till the life expectancy of the spouse or any other dependent member in the family.

Factors to be Considered while Calculating the Sum Assured

Sum assured is not a fixed number and it will always vary from person to person depending on their future financial needs and current earnings and outgoings. While calculating the sum assured, consider the following factors:

1. Age

Your age will help you determine the coverage you need.

2. Income

Your income helps assess your living standard, and hence it is an essential factor to determine the sum assured.

3. Dependents

The sum assured depends on the total number of dependents. The higher the number of dependents, the higher the sum assured you need.

4. Life and Lifestyle

Lifestyle habits such as drinking and smoking will push your premium up and affect your sum assured.

What is the Difference between Sum Assured and Sum Insured?

Sum Insured Sum Assured
Applicability It is applicable for non-life insurance plans such as home insurance, health insurance, motor insurance, etc. It is applicable for life insurance plans.
Policy nature The reimbursement is only for the amount of loss or damage. A fixed, pre-decided amount is given to the nominee in case of a policyholder's death during the policy tenure.
Calculation It is calculated as per the damages incurred by the policyholder. It is calculated based on the HLV.
Benefits No monetary benefits. The policyholder receives only the amount toward losses. The monetary benefit is paid to the nominee.

How to Increase the Sum Assured as per your Financial Needs?

You can buy life insurance plans for the financial protection of your family. However, these plans are a good way to invest for long-term goals such as a child’s higher education, marriage, retirement, etc. So, you can increase the sum assured by either buying different plans or with a single term plan with increasing cover.

Listed below are different types of life insurance plans that you may consider:

  • Term Life Cover

    Term insurance cover is a pure protection life insurance. This plan gives you high coverage at a nominal premium cost. The cover ensures the future of your loved ones is secured even when you are not around.

    Ideally, you should have a term life cover 10-15 times your annual income. If you have any other life insurance plans for important life goals of your children and family, you can have a lower sum assured.

  • Unit Linked Insurance Plan (ULIP)

    It is a policy that offers the benefits of life insurance as well as an aggressive investment portfolio. With ULIPs you can invest in well-diversified portfolios to get market-linked returns.

    ULIPs like Canara HSBC Life Insurance Invest 4G allow you to continue your investment till 99 years of age along with giving you 8 different fund options to generate wealth as per your financial risk appetite and needs.

  • Endowment Plans

    It is a life insurance policy that gives you insurance cover and a saving option. The sum assured is the amount you get when the policy matures depending on the terms and conditions. In case, the policyholder passes away during the policy tenure, the insurance company pays the nominee the death benefits.

    Know more about - endowment plans.

  • Moneyback Plans

    These plans offer you a sum assured as survival benefits that are usually evenly distributed throughout the policy term. In case of the unfortunate event of the policyholder’s death, the nominee receives the sum of the whole sum assured.

  • Whole Life Cover

    It provides you cover throughout life and not just for specific years, given you have paid all the premiums. Generally, a policyholder gets a life cover till 100 years of age.

How does the Sum Assured Work in a Health Insurance Policy?

You can encounter two kinds of health risks in your life – temporary and life-threatening. While temporary health hazards only need temporary medical attention, the life-threatening types will need extensive care. Generally, the sum assured in a health insurance plan, that amount is paid as medical expenses to the policyholder.

There are two types of health insurance policies and they are:

Mediclaim Health Insurance

Mediclaim is a sum insured based health insurance policy. Assume the policyholder is diagnosed with malaria and get admitted to the hospital. The treatment cost comes to be Rs 80,000. They have a health insurance plan with a sum insured of Rs 5 lakh. As a result, most of the treatment costs will be borne by the insurance company.

Critical Health Insurance

Critical health insurance is a health plan with a sum assured. This means the policyholder will receive a lump sum benefit from the plan if a covered health event occurs. For example, policyholder buys a health insurance plan with critical illnesses cover like cancer, and the sum assured is Rs 20 lakh. If they are diagnosed with cancer or any other critical illness covered in the plan, they will receive a sum assured of Rs 20 lakh.

Get Life

The world we live in is full of risks and uncertainties. There are various risks like loss of life, assets, health, etc. You cannot possibly prevent the unwanted events from occurring but you can safeguard your financial health from them.

Essential Insurance plans like term life and health insurance plans safeguard you against common hazards in life. At the same time, you can also invest in ULIP plans to build wealth and meet long-term goals.

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised to exercise their caution and not to rely on the contents of the article as conclusive in nature. Readers should research further or consult an expert in this regard.

Related Articles

Browse by Categories

Get a Call Back

Do you want us to call back Please fill the form below

Annual Income (In Lacs)

Our Products

iSelect Smart360 Term Plan

Term Insurance Plan

Life Cover till 99 years of age

Option to Block the premium rate and increase cover by upto 100% at the blocked rate

Option to avail monthly income post attaining 60 years of age

Option to receive total premiums paid in case of no claim

Tax Benefits as per applicable laws

Guaranteed Savings Plan

Savings Plan

Better value for high premium commitment

Guaranteed benefits payable on maturity

Life cover for the entire term

Flexibility to choose premium payment terms

iSelect Guaranteed Future


5 plan options to choose from to protect your loved ones

Pay premiums for 5,7, or 10 years as per your financial goals

Payor Premium Protection Cover to secure your family’s future

Tax benefits may be available as per prevailing Tax Laws

Online Plans Pay Premium Get a Call Contact Us