Sum in­sured and sum as­sured

The Hindu Business Line - - YOUR MONEY -

These two terms, though they seem to mean al­most the same thing, are vastly dif­fer­ent in an in­sur­ance pol­icy.

The sum as­sured is the ben­e­fit that is pre-de­fined and to be paid to the pol­i­cy­holder in the event of a claim. Rel­e­vant to life in­sur­ance poli­cies, the sum as­sured is de­cided while pur­chas­ing the in­sur­ance pol­icy. The pol­icy ter­mi­nates once the as­sured sum has been paid.

But the sum in­sured refers to the amount that cov­ers the cost of re­pair or com­pen­sa­tion upon the oc­cur­rence of the event in­sured against.

In gen­eral in­sur­ance poli­cies, in­clud­ing health in­sur­ance, mo­tor and home in­sur­ance, the amount of cov­er­age is al­ways the sum in­sured. This amount in­volves an up­per limit that is pre-set. Since de­ter­min­ing an up­per limit on ma­te­rial pos­ses­sions is pos­si­ble as it wouldn’t sur­pass the price of the ma­te­rial it­self, a sum in­sured is eas­ier to fix on prop­er­ties than on one’s life.

An im­por­tant dif­fer­ence be­tween these two con­cepts is that in the case of the sum as­sured, the pre-de­ter­mined amount of money is paid to­tally, re­gard­less of the value of the dam­age at the time of claim, whereas a sum in­sured pol­icy only guar­an­tees the ex­act value of the dam­age. Thus, in health in­sur­ance, in medi-claim poli­cies, the ben­e­fit amount is called sum in­sured; in crit­i­cal ill­ness poli­cies, it is termed sum as­sured.

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