Understanding key terms used in the finance and insurance industry is quite essential for achieving great returns. While it’s nearly impossible for someone without expertise to learn every term, there are some important concepts that can actually be easily grasped.

If you’re considering purchasing a life insurance policy any time soon and want to make a confident choice, it’s crucial for you to understand terms “sum assured” and “maturity amount.” In this blog post, we shall explain both of these terms in detail. 

What Does Insurance Mean?

Insurance means financial tool that provides security during difficult times. In simple terms, it is a contract between an individual and an insurance company, where the insurer agrees to offer financial protection against specific risks in exchange for a premium. Depending on type of insurance, the policy may cover health-related expenses, loss of life, vehicles, property, travel or other unforeseen events.

Many people today choose to purchase insurance due to the rapidly changing lifestyle and increasing uncertainties of life. Health insurance has become essential for managing high costs associated with quality healthcare services. Similarly, life insurance is viewed as a financial safety net that offers support to a family in the event of a policyholder’s death. 

What is Sum Assured in Insurance Policy?

Sum assured meaning in life insurance can be explained as the total worth of a life cover that is measured on the basis of the policyholder’s financial worth. In other, it is a fixed amount that is provided by the insurance company to the nominee appointed by the policyholder if he or she dies unexpectedly. Sum assured on death is also known as life cover and confirmed at the time of buying the policy. 

The assured sum may be inclusive of the benefit given on the add-on rider along with fixed financial value offered at the time of policy maturity. For example, in the case of a savings insurance plan, along with the life cover, the life insurance policy also gives a guaranteed sum assured maturity benefit, and as it is guaranteed, it is called the sum assured on maturity.

Sum Assured Calculation Formula

With the help of the formula below, an individual can calculate the sum assured in life insurance quite easily.

“Sum Assured = (Annual Income × Remaining Years of Work) + Outstanding Liabilities + Future Financial Goals − Existing Liquid Assets − Existing Life Insurance Cover” 

What Does the Maturity Amount Mean?

The maturity amount in life insurance refers to the amount that is provided to the policyholder by the insurance company at the completion of the policy tenure. This monetary benefit is given when the policyholder surpasses the period of the life insurance policy.

Sum Assured vs Maturity Amount: Comparison

Let’s understand the difference between sum assured and maturity amount with the help of the table given below:-

Details Sum Assured Maturity Benefit
Benefit Type The sum assured amount refers to guaranteed amount payable under policy. This amount may be given to nominee in case of policyholder’s death, depending on policy terms. The maturity benefit is the amount payable to the policyholder when the policy term ends, subject to the terms and conditions of the policy.
Benefit Goal The assured sum death benefit provides financial security to dependents in case of policyholder’s demise during policy tenure. It provides funds at the end of policy term that can help a person meet their future financial obligations and goals.
Beneficiaries The nominee generally receives the death benefit if policyholder dies during policy term while the policyholder may receive a maturity benefit if policy provides for one. The insurance company pays the maturity benefit to policyholder at the completion of the policy term, subject to policy terms.
Payment Time In case policyholder passes away during the policy tenure, the applicable death benefit is then paid to nominee as per policy terms. The maturity benefit is paid when the policy term ends provided the policyholder meets applicable conditions.
Underlying Factors The assured sum is generally selected on the basis of the policyholder’s coverage needs and type of insurance policy along with other factors considered by the insurer. The maturity amount depends on the type of policy and its terms, which may include the assured sum, premiums paid, bonuses, guaranteed additions or investment returns, as applicable.
Applicability Assured sum is a common feature of life insurance policies. With that being said, the way it is paid and calculated may differ from one policy to another. Maturity benefits are available only in life insurance policies that provide a maturity payout under their terms and conditions.

 

Documents Required to Claim Sum Assured and Maturity Amount

To receive sum assured and maturity amount, you need to submit certain documents to the insurance company. Depending on the type of benefit, the claim process can be completed in either online mode or offline mode. Take a look at the major documents you may need to submit for both of the benefits:-

Sum Assured Death Benefit Maturity Benefit
  • Claimant Form
  • Death Certificate
  • Life Insurance Policy document
  • First Investigation Report (FIR) in case of accidents
  • Medical Documents
  • Post-mortem Report
  • Proof of Identity
  • Proof of Residence
  • Bank Details
  • Life Insurance Policy Document
  • Proof of Identity
  • Proof of Residence
  • Bank documents

To Sum Up

When you decide to buy an insurance policy, it is very necessary to understand the difference between sum assured and maturity amount. While assured sum gives your family a kind of financial protection in case of your untimely demise, maturity amount lets you build wealth over a period of time by making smaller savings on a regular basis. Both these benefits are intrinsic to most insurance policies. So, make sure you do thorough research on all available options before finalizing a particular life insurance policy. 

Frequently Asked Questions (FAQs)

Q1. What is the meaning of sum assured in LIC?

Sum assured meaning in LIC can be explained as a guaranteed, pre-determined amount the insurance company promises to pay nominee upon policyholder’s death or to policyholder upon surviving till maturity. 

Q2. What is maturity sum assured meaning in LIC?

Sum assured on maturity, or simply maturity sum assured, is the amount payable by LIC to policyholder when policy reaches its maturity date.