Insurance is a contract between any person and the insurance company. Under this contract, the company agrees to give a predetermined amount to his heirs in the event of the death of the person within the stipulated period. This predetermined amount is called a sum assured.
What does ‘Some Assured’ mean in insurance cover?
Sum Assured or Sum Insured is the value of the insurance cover that the insurance company decides for the policyholder while purchasing the insurance policy.
If you have taken a life insurance or mediclaim policy, then you must have seen that a word comes in it again and again. That is ‘Some Assured’. In the true sense, the policy is taken only for the sum assured. Therefore, it is important to understand the sum assured in the policy. Come, let’s know about it here.
- Sum Assured or Sum Insured is the value of the insurance cover that the insurance company decides for the policyholder while purchasing the insurance policy. This is a kind of guaranteed amount that the policyholder gets. It is also known as a cover or coverage amount. This is the total amount for which the person insures.
- In case of any untoward incident such as sudden death, the sum assured is the amount which the insurance company gives to the beneficiary.
- The sum assured depends on the income of the person. It is generally allowed to keep up to 10 times the annual income as the maximum sum assured.
- If the sum assured is calculated keeping in view the expenses, then it should be at least 12-15 times of the annual expenses along with the debt liability. Such loans include loans such as home loans.
- The sum assured should be 10 times the annual premium to get tax benefit under section 80C. The amount received on maturity of the policy is tax-free under section 10 (10D).
In fact, we take insurance only for the sum assured. The amount of the sum assured is affected by the insurance holder during the insurance period and the amount of the claim at the time of claim. The life insurance premium is determined only on the basis of the sum assured, which affects the insurance holder during the term of the insurance.
The maturity amount or the claim amount of the insurance also depends on the sum assured. At the time of signing the life insurance contract, the insurer i.e. the insurance company and the insured i.e. the buyer of the policy, agree on the amount payable on the death of the insured.
It is assigned to the nominee which is decided by the insured. In fact, Sum Assured is the amount for which the insurance holder pays the premium.
So friends, hope you liked this article and you got some new information. Please tell me in the comments.