What is Sum Assured in ULIP: How to Choose and Benefits

Before you buy a ULIP, you need to understand all its terms and features properly. Sum assured in ULIP is an aspect you must be careful of while choosing a plan. It is the fixed minimum amount that a nominee is eligible to get if a policyholder dies within the coverage period.

So, let's understand some of the must-know aspects of the sum assured amount of ULIP.

Sum assured in a ULIP is the minimum amount that a nominee gets on a policyholder's unfortunate demise. It should occur before its maturity period. This amount is not variable like its maturity benefit. Instead, a nominee will get a fixed amount as determined while buying a plan.

Insurance companies provide different ULIP products with diverse premiums. You need to choose one of them according to your requirements. Nevertheless, since the sum assured amount stays the same throughout its term, you have to take into account several aspects. These are listed below:

• Annual Family Budget: You need to ensure that the sum assured amount your family will receive is sufficient to get on with their lives and livelihoods. For this, you first need to be aware of the total annual expense of your family in the current and previous years. Then, you can choose a sum assured amount at par with your family’s annual expenses.
• Upcoming Large Expenses: You may have additional expenses like marriage or higher education. In such cases, you need to ensure that the sum assured in ULIP helps your family manage those bigger expenses without your income.
• Existing Liabilities: You also need to consider your current liabilities while deciding your sum assured amount. If something unfortunate happens to you, the sum assured should be able to help your family close it. Otherwise, it may be financially challenging for your near ones to repay.
• Remaining Working Years: The life cover part of ULIP acts as an alternative to the savings you would have made if you had worked until retirement. So, you will have to calculate how many working years you have remaining while purchasing the ULIP. If it is higher, the sum assured should ideally also be more.

With a higher sum assured, individuals’ families can meet all financial obligations properly after their demise. It will not be difficult for their families to bear the expenses of children's education, repay loans (if any), plan weddings, etc. This way, a higher sum assured can help policyholders' families to maintain financial stability after their unfortunate eventualities.

Besides the sum assured, you also get different pay-out options in ULIP, as mentioned below:

Maturity Value

In a ULIP, your insurance company invests a fixed percentage of the premium in bonds and stocks. As a result, this insurance plan helps you earn returns and grow your capital.

The maturity benefit of your ULIP is the fund value of your policy when its terms expire. This maturity value will be higher with higher fund gains. You receive the total value of your fund when your policy matures.

Surrender Value

Insurance companies let you close your ULIP voluntarily after the lock-in period expires. If you surrender your ULIP prematurely, the company will give you the fund value calculated on that date. However, they will deduct a certain charge for this facility.

Death Benefits

The death benefit is an amount that a policyholder's nominee gets in case of their death before the ULIP matures. A policyholders’ families will get the highest of the following amount as death benefit:

• Sum assured
• Present fund value of your investment
• 105% of the total paid premium

The sum assured in ULIP refers to a fixed amount that nominees will get owing to life coverage component of this policy after the premature death of policyholders. Therefore, individuals must ensure that this amount is sufficient for their family members to lead their livelihoods for an extended period.