What is Sum Assured in LIC? A Comprehensive Guide for Policyholders

The Sum Assured is a critical term in life insurance policies, including those offered by the Life Insurance Corporation of India (LIC). If you’ve come across this term and are wondering, “What is Sum Assured in LIC, and why is it important?” this article is here to provide clarity.

What is Sum Assured in LIC?

In simple terms, the Sum Assured is the amount that LIC agrees to pay to the policyholder or their nominee in the event of the insured’s death or upon policy maturity. It acts as the guaranteed benefit provided under the policy, making it one of the most important factors to consider when purchasing an insurance plan.

For example, if the Sum Assured of a LIC policy is ₹10,00,000, then this is the minimum amount your family or nominee will receive under the policy’s terms, ensuring their financial security in your absence.

What we will learn here?

  • What is Sum Assured in LIC policy?
  • Importance of Sum Assured in life insurance.
  • How to calculate Sum Assured in LIC plans?
  • Benefits of choosing a high Sum Assured in LIC.
  • LIC Sum Assured vs Policy Premium: What’s the difference?

How Does Sum Assured Work in LIC Policies?

  1. In Case of Death:
    If the policyholder passes away during the policy term, the Sum Assured is paid to the nominee as a death benefit.
  2. On Policy Maturity:
    If the policyholder survives the policy term, the Sum Assured is paid as a maturity benefit, sometimes along with bonuses or additional benefits, depending on the policy type.
  3. Riders and Additional Coverage:
    Riders like accidental death or critical illness may increase the payout over the Sum Assured in certain situations.

How to Calculate Sum Assured in LIC Policies?

Calculating the right Sum Assured depends on several factors:

  • Income Replacement: Ideally, your Sum Assured should be 10-15 times your annual income to ensure your family’s financial stability.
  • Liabilities: Include debts such as home loans or car loans in your calculations.
  • Future Goals: Consider your family’s financial goals, such as children’s education or marriage expenses.

Example of Sum Assured Calculation

Suppose your annual income is ₹6,00,000, and you want coverage for 15 years. A basic formula could be:

Sum Assured=Annual Income×15=₹6,00,000×15=₹90,00,000

Why is Sum Assured Important in LIC Policies?

1. Financial Security for Your Family

The Sum Assured acts as a financial cushion for your loved ones in case of unforeseen circumstances.

2. Helps Achieve Financial Goals

A well-chosen Sum Assured can ensure that your family meets their future needs, such as education or retirement planning.

3. Tax Benefits

Premiums paid for LIC policies with Sum Assured qualify for tax benefits under Section 80C of the Income Tax Act.

LIC Policies and Sum Assured Options

LIC offers a wide range of policies with flexible Sum Assured options. Here are some examples:

  • LIC Jeevan Anand: Combines endowment and whole-life benefits with a fixed Sum Assured.
  • LIC New Endowment Plan: Offers maturity benefits with bonuses on top of the Sum Assured.
  • LIC Term Assurance Plan: Provides high Sum Assured at low premiums for pure protection.

Frequently Asked Questions about Sum Assured in LIC

1. Is Sum Assured the same as maturity amount?

Not always. The maturity amount can include the Sum Assured plus bonuses or other benefits, while the Sum Assured is the guaranteed base amount.

2. Can I increase my Sum Assured during the policy term?

Some LIC policies allow increasing Sum Assured through riders or policy upgrades, but terms may vary.

3. How does Sum Assured impact premiums?

Higher Sum Assured usually results in higher premiums. However, it ensures better financial protection.

Conclusion: Why Understanding Sum Assured is Essential

Choosing the right Sum Assured in your LIC policy is crucial for ensuring the financial well-being of your loved ones. By understanding its importance and calculating it based on your income, liabilities, and goals, you can make an informed decision that aligns with your needs.

If you’re considering buying a LIC policy, evaluate your Sum Assured carefully to maximize its benefits. Visit your nearest LIC branch or consult a LIC advisor for personalized guidance.