Glossary · Insurance
Sum Assured
The fixed amount that the insurance company agrees to pay to the nominee on the insured event (death or maturity) under a life-insurance policy.
The sum assured is the core benefit of a life-insurance contract. For term plans, the sum assured is paid in full to the nominee on death. For endowment or money-back plans, the sum assured may be paid on maturity or death, whichever is earlier. Sum assured should ideally be 10-15 times the annual income for adequate family protection. Under Section 10(10D) of the Income Tax Act, the sum assured received by a nominee is fully tax-free.
Examples
A 35-year-old earning ₹10 lakh a year takes a term plan with sum assured of ₹1.5 crore to cover 15 years of income replacement.