1. Core Concept Comparison Table
| Parameter | Sum Assured | Sum Insured |
|---|---|---|
| Primary Category | Life Insurance / Term Insurance | Health, Motor & Property Insurance |
| Operating Principle | Fixed Benefit Contract: Pays the full predetermined amount regardless of actual expenses. | Principle of Indemnity: Reimburses only actual medical/damage loss up to the limit. |
| Payout Trigger | Demise of policyholder or policy maturity. | Hospitalization, surgery, accident damage, theft. |
| Tax Exemption | Death payouts 100% tax-free under Section 10(10D). | Claims reimburse actual medical loss (non-taxable). |
2. Real-World Practical Example
- Sum Assured Example: Rajesh has a ₹1 Crore term plan. Upon his demise, his nominee receives the ₹1 Crore lump sum payment, subject to claim approval under policy terms.
- Sum Insured Example: Rajesh has a ₹10 Lakh health policy. If his surgery costs ₹2.5 Lakhs, the insurer pays ₹2.5 Lakhs. His remaining sum insured for the rest of the year is ₹7.5 Lakhs.