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What Is Sum Insured In Health Insurance?
Mar 30, 2021

What Is Sum Insured In Health Insurance?

Insurance policies have terms that may appear simple but could have complicated meanings, and understanding the right essence of these terms is necessary to avoid any confusion later. One of the initial questions that the probable policyholder has to answer is how much coverage or sum insured is required by him? But for that, the question that arises in the policy taker’s mind is what is sum insured in health insurance? Also, we first need to understand the sum insured meaning before getting into any details.

Sum Insured meaning

The maximum amount that the insurance company can pay to the policyholder in case of any loss or damage suffered by him shall be termed as the sum insured. At times, people also call it maximum coverage under health insurance. So we can say that if you get hospitalized for any reason, then the health insurance provider company will pay you the full amount up to the sum insured, provided it is not explicitly excluded from the benefit. If the actual expenses exceed the sum insured, then the excess amount has to be borne by the policyholder himself. Example: Suppose Mr. Rahul has a health insurance policy with a sum insured of Rs 5 lakhs. Now, he gets hospitalized and claims bills worth Rs 3.8 lakhs. The claim gets approved. Now again, due to some other reason, he gets hospitalized, and bills this time amounts to Rs 2 lakhs. Now the insurance company will pay only Rs 1.2 lakhs, and the balance shall be borne by Mr. Rahul himself.

What is the impact of the sum insured on the premium amount?

Sum insured provides a cap on maximum damages that can be covered in a year in case of occurrence of any unforeseen event. The higher the sum insured is, the higher the amount that the insurance company has to be by the insurance company in event of a claim being made. Hence, this increases the amount of insurance premium to be paid for the higher sum insured.

Difference between sum assured and sum insured.

A very technical part of the policy is the difference between sum assured, and sum insured. Now, these may look and sound alike but are totally different in reality. Sum assured is the fixed amount that shall be paid on occurrence or non-occurrence of a particular event. On the other hand, the sum insured is the maximum amount that shall be paid in case of a particular event. Sum assured is the clause generally seen in life insurance policies, while sum insured is majorly seen in policies other than life insurance.

Importance of Appropriate Sum Insured

It provides you a sense of security in terms that even if something happens to you today, your lifelong savings will not get exhausted over treatment, and you will be left with some money to go through your later stages of life. A sense of financial security gives you peace of mind and reduces stress. What better than that in times when people live under the constant pressure of various matters. An adequate sum insured is most important in cases where you have opted for a family floater policy. If something happens to multiple members of the same family, then times can prove crucial in terms of finances within the family.

How to choose the right sum insured?

Age Factor

Age plays a significant role in deciding the sum insured. With aging comes a higher probability of getting a disease, which in turn increases the need for a higher sum insured. Hence, we can say that the earlier we start, the better it is.

Current health state

You need to go through the medical history of yourself as well as your immediate family and decide upon the sum insured because some pre exiting diseases faced by your immediate family puts you at a higher chance of getting that condition sooner or later.


Something we all are now familiar with is that stress causes a lot more harm than anything else. Apart from that, many jobs involve high-stress work while others might put you at risk of getting a specific disease. All these considerations are taken into account while deciding on the sum insured.


1 . Will the insurance company pay you in excess of the loss suffered if it is within the sum insured? The policy of health insurance works on the principle of indemnity. This means that the insurance company is liable to make any loss or damage suffered by the policyholder good. Still, the policyholder is not entitled to any benefit from this policy. The purpose of this policy is to reduce the burden of medical expenses and hospitalization costs from the policyholder’s head. 2. Are there any differences if a person opts for online health insurance instead of a physical policy? Whether online health insurance or offline, it doesn’t have any bearing on the sum insured or other operating and technical procedures of the policy.   *Standard T&C apply Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.

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