Sum assured

Sum assured is the insurance industry’s term for the cover amount in a life policy: the sum the insurer agrees to pay if the insured event happens during the policy term. In a term plan, that event is death. In savings-oriented policies, a maturity benefit may also apply, calculated according to the policy terms.

Why it matters

It is the most important number in a life policy. Too little cover leaves dependants short; too much costs premium you could use elsewhere. Getting it right means estimating what your family would actually need without your income.

How to read it

• Cover vs premium. For term plans, the premium is a small fraction of the cover. In savings plans, cover is often a multiple of the annual premium, which tends to give far lower cover for the same budget.
• Level, increasing or decreasing. Some policies let cover rise each year, or step down as a loan is repaid.
• Payout options. Cover can be paid as a lump sum, as monthly income, or a mix — useful if your family would need help managing a large amount.

Common misconceptions

• “A round number is enough.” Cover should be built up from your family’s needs, not chosen because it sounds large.
• “The cover amount is what I get back.” In a pure term plan, nothing is paid if you outlive the term.
• “More cover is always better.” Beyond what your dependants need, extra cover is simply extra cost.

Note: The Insurance Cover Calculator estimates an indicative cover need using the income-replacement and expenses-plus-liabilities methods, with every assumption visible.