What is Sum Insured?
It is the maximum amount an insurance company pays you based on your insurance agreement. This insurance-term applies to all types of Insurance policies like Life Insurance, Health Insurance, Vehicle Insurance, Shop Insurance and all others.
What does the Sum Insured mean for your home?
For house, the sum insured usually based on square feet and market value. It may not cover the entire cost of rebuilding the house. If the cost of rebuilding the house is more than the sum insured to rebuild your home, you will have to pay for the remaining money. The sum insured is not the price incurred to build your house, or the rate of valuation. The price you paid includes the value of land and also reflects the market value of your house, rather than the cost for rebuilding it. The market value of your home will not equate with what it costs to rebuild it.
What does the Sum Insured cover?
Typically, house insurance will cover the costs of rebuilding your home. But, some insurance policies also cover additional costs associated with house like technical assistance, demolishing house…. It would be wise to know your policy carefully and understand what it covers. Please ask your insurance provider to explain your policy to you if you are not sure about what are covered when paying insured sum.
Sum insured is the amount of money that the insurance company is liable to pay to the holder on maturity of the policy or as the case may be. It does not include the total cost but it helps in recovering the loss partly. It differs with different policies.
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