What is Sum Assured? A Simple Explanation for Policyholders

Sum Assured is the fixed amount your insurance company agrees to pay your family if you die during the policy term. That's it. It's the number on the front page of your policy document, and it's the only number that truly matters when someone actually needs to file a claim.

In my 31 years of advising families in Gorakhpur, I've seen the same mistake repeated. People pick a Sum Assured based on what premium they can afford rather than what their family actually needs. A Rs 5 lakh policy sounds like a lot until you realize it covers about eight months of a family's living expenses in 2026.

How much Sum Assured do you need? The standard formula is 10 to 15 times your annual income. If you earn Rs 8 lakh per year, your Sum Assured should be between Rs 80 lakh and Rs 1.2 crore. This sounds like a large number, but under a pure term plan like LIC Jeevan Amar, a Rs 1 crore cover for a 35-year-old costs roughly Rs 12,500 per year. That's Rs 34 per day.

Sum Assured vs Maturity Amount: these are different things. For an endowment or savings plan, the Sum Assured is the death benefit. The maturity amount includes the Sum Assured plus bonuses accumulated over the policy term. When agents advertise maturity benefits, they're talking about a higher number. When a claim is filed, only the Sum Assured (plus any guaranteed additions) is paid.

One important rule: your total insurance cover across all policies should not exceed 20 times your annual income. Insurers apply this cap during underwriting. If you've already taken a Rs 50 lakh policy and want more, check your existing cover before buying another plan.

If you're not sure what Sum Assured you need, call me at 9415313434. I'll do the calculation for your specific income, liabilities, and family situation in five minutes.

Use our free [Premium Calculator](/calculators/premium) to see how Sum Assured affects your premium.