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It is understandable that insured will not aware of insurance terminologies but they should make effort to understand the basic concepts. It is always better you understand what you are getting yourself into. Otherwise it is likely that you will face consequences at the time of claims.

Sum Assured and Sum Insured the terms which often used by customer interchangeably. Although on the look of it the difference is only in two alphabets, but they carries two different meanings. 

Sum Assured:

Sum Assured is pre-defined benefit that insurance company pays to the policyholder in the insured event. In case of life insurance policy, the insurance company pays Sum Assured which is pre-defined amount which will be paid either in case of death or incase of maturity.  

If the policyholder dies during the term of the policy, the insurer will pay the nominee the sum assured and the policy terminates. 

Sum Insured:

A Sum Insured is maximum limit of liability of insurance company. Policy that offers sum insured works on the principle of Indemnity.Normally non-life insurance policies are issued on the principle of indemnity.  

Insurance policies such as motor, health, fire which has Sum Insured that is maximum limit of indemnity. In case of health insurance policy which has Sum Insured of Rs 1 lac. If person gets hospitalized and has to pay Rs 60,000, in that case insurance company will pay entire amount. But if hospitalization expenses increase to Rs 150,000, then insurance company will pay only Rs 1 lac and rest insured has borne by him self. 

Idea behind it is that insured should not be given more than a loss he has suffered. Therefore cover on these policies is referred to as the Sum Insured and not the Sum Assured. 

It will always better if you have the knowledge insurance terms at time of buying insurance policy. Sum Assured which you can find in case of life insurance policies and Sum Insured which you can find in non-life policies which are based on principle of indemnity. 

Know more about life and non-life insurance India.