A life insurance policy not only provides you financial safety, but in case of your unfortunate death, it can also help your family to a great extent by way of giving them the “sum assured” as a death benefit so that they can easily manage their expenses.
Sum Assured in LIC Policy
You should know that the sum assured in a life insurance plan is the guaranteed benefit amount under the policy. However, the sum assured amount can decrease or increase over the time duration of the policy, which depends on the specific terms and conditions of the policy plan.
Usually, the following are the three main things that are considered at the time of choosing an adequate Sum Assured, such as:
1. Current Earnings
Your earnings are the most critical factor for determining how much you can pay as your life insurance premiums. If you decide on the higher sum assured, then your premium will also be higher. Hence, you are required to be assured how much you can spend from your income after you meet routine expenses.
2. Current Financial Liabilities
You should take into consideration all types of ongoing long-term loans, if any, and add them to your sum assured of the life insurance plan.
3. Needs Of Your Family
You should correctly estimate the future expenses which will be pursued, such as meeting the expensive higher education in your ward, marriage expenses for your child, and monthly expenses. Therefore, you should carefully choose an assured sum that will be enough to cater to all these requirements.
The Main Difference Between Sum Assured And Sum Insured
- You should know that the sum assured is defined as the value of life cover under a life insurance policy. Whereas the sum insured is the value applicable to a non-life insurance policy, such as car insurance “sum insured.”
- Normally, while calculating the sum assured, the economic value of an individual’s life is considered because there is a possibility that his economic value may actually go up over a period of time. In contrast, the sum insured amount generally becomes less valuable over a period of time for assets insured.
- However, the completely necessary difference between the sum assured and the sum insured is different risk coverage for the creator of the asset and the asset itself.
- You should know that the sum assured is a predetermined amount that the life insurance policy issuer pays to the policyholder or nominee in case of an unfortunate death. In contrast, the sum insured is based on the concept of giving protection against damage or loss, especially in the form of a promise to pay for anything that happens against damage or loss in the form of reimbursement or compensation.
- You should know that the sum assured is the benefit given to the insured person or the beneficiary, where the maturity benefits depend on the particular type of life insurance plan chosen by an individual. In contrast, there is no maturity benefit involved to the sum insured.
So this way, you can easily learn about the sum assured in LIC policy.
Useful Thoughts In Conclusion
It is advised that you should try to maintain a life insurance sum assured equal to 10 times your annual earnings. Apart from that, you can also buy a new term policy to raise the total life cover sum assured and keep up with your income.
However, before deciding the sum assured in a life insurance plan, it is most necessary to understand in detail the different types of life insurance plans to choose the best optimal plan as per your requirement and compare the insurance policies to make a smart decision.