What is difference between sum assured and guaranteed returns?

Understanding the difference between sum assured and guaranteed returns will help you make the right choice.

'Sum assured' and 'guaranteed returns' are the two commonly used terms when it comes to insurance plans. Although both the terms are linked with monetary benefits of a policy, there is a significant difference between the two.

Although both the terms are linked with monetary benefits of a policy, there is a significant difference between the two.

Here's a closer look at both these concepts.


Sum assured is the minimum amount payable by the insurance company in case of death of the policy holder. This is hence the actual coverage, which determines the amount of premium payable by the policy holder. Guaranteed return, on the other hand, is the minimum amount that the insured person receives when he/she outlives the life insurance policy's tenure.

For instance, if a 20-year life insurance policy provides a coverage of Rs 10 lakh to the beneficiaries on death of the policy holder and Rs 6 lakh on maturity, the former is sum assured while the latter is guaranteed returns.

The main difference

While the policy holder can select the sum assured or coverage, it is mandatory for insurance companies to pay out this sum in case of the unfortunate death of the policy holder. The amount of guaranteed return is determined solely by the insurance company. Different plans may have different guaranteed returns as specified in the terms and conditions. Many insurance companies today offer guaranteed returns to attract customers who seek returns on their premiums.

Which is suitable for you?

A policy buyer looking at insurance as an investment tool is more likely to look at the guaranteed returns aspect, while those intending to secure their loved ones'future will probably opt for a plan that has a higher sum assured.

While these are two different elements of a life insurance policy, you do not have to buy different policies to avail both. Most endowment policies offer sum assured as well as guaranteed returns, as the policy holder will be able to avail of only one benefit.


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