Assured Sum or Sum Assured
Assured sum or sum assured is the minimum sum that an insurer will pay to the insured on the occurrence of any event. It is the actual coverage of the insured. The Sum assured opted by the insured determines the premium payable by him.
Age and Insurance Premium
For policies where the premium is invested in stocks, the sum assured is generally a multiple of the premium paid. The age of the insured has no bearing on the premium paid. For example, the premium paid by both a 20 year old and a 50 year old for the same assured sum will be same. But for traditional products, where the returns are not related to the market conditions, the premium paid for the same assured sum is directly proportional to the age of the insured. In such cases, the premium paid for a 2 year old will be much less than that of a 50 year old for the same assured sum.
Earlier the Better
From the above we can conclude that for investing in traditional insurance products, as early you start the insurance, the more economical the insurance is. Since the mortality rate which is an important consideration while calculating the premium increases as the age of the insured increases.
Basically, Assured sum is the amount of money payable to the policyholder after his/her unfortunate death. The amount paid is according to the premium he has selected. Normally, this kind of policies are opted by the people who wants to secure the future and livelihood of their loved ones in case they die.
Wow, these financial terms can be so confusing some times, but this article is explained it in simple and straight forward language. There are so many different policies, and investment plans that we need to know each and every aspect, before we indulge into any of the plans.
Now i totally understand why we should plan these investments at an early stage for the security of our family, as the premium will affect. Good information, and easy to understand…Thanks