What is sum insured / policy limit?
Sum insured or policy limit is the maximum amount your insurance company will pay out to cover an insurance claim. This limit is determined in your insurance policy and can vary depending on the type of coverage you choose to buy.
How is sum insured calculated?
The sum insured is calculated depending on the insurance policy you are considering purchasing.
In the case of health insurance, the sum insured may be determined based on factors such as the insured person's age, health status, pre-existing conditions, and medical history, as well as the specific coverage options selected.
In car insurance, the sum insured is calculated based on the model and brand of your vehicle, the estimated cost of car repair, spare parts cost and availability, driver profile and much more.
Why do policy limits matter?
Sum insured or policy limits matter for several reasons:
Protection - Policy limits give you financial security in case an unfortunate event occurs that is covered in your policy. Instead, your insurance company is responsible for paying out your claim.
Affordability - Policy limits also affect the affordability of insurance premiums. Higher policy limits result in higher insurance premiums, respectively lower policy limits are more affordable.
Compliance - Policy limits are often mandated by law or regulation. For example, drivers are required to purchase minimum liability insurance coverage for bodily injury and property damage.
Risk management - Policy limits are adjusted by underwriters based on assessing the risk associated with a particular policyholder or type of policy.
What policy limit should I have?
It is important to choose insurance policy limits for your insurance policy, depending on your circumstances. You should consider the length of insurance coverage, covered events, and limits per each event. For example, you should consider your age, risk, pre-existing conditions, medical history, and lifestyle before purchasing a cancer insurance policy. So if you are a middle-aged woman with a family cancer history, you are at higher risk. Unfortunately, cancer treatments like chemotherapy, prescription drugs, and medical expenses are costly, so you should choose a higher sum insured.
Are you still insured if you are over the limit?
“Over the limit” means that your insurance claim exceeds the conditions covered in your insurance policy. For example, if you are engaged in illegal activities such as driving under influence of alcohol or drugs and an accident occured, insurance companies usually will decline your insurance claim.
What are the different types of policy limits in insurance?
There are four common types of policy limits:
- Liability limits - Liability limits are the maximum amount that an insurance policy will pay out for a covered insurance claim if you are at fault in an accident. The liability limit is written in numbers. For example, 400,000 THB/ 1,000,000 THB. Maximum coverage of damages to your car 400,000 THB, while bodily injury is covered up to 1,000,000 THB.
- Deductible limits - Deductible or insurance excess is the amount that you are responsible for paying out of pocket before your insurance policy begins to cover the remaining costs. For example, if you have a 1,000 THB deductible on your auto insurance policy and you have 5,000 THB in damages from an accident, you would pay the 1,000 THB first and your insurance company would cover the remaining 4,000 THB.
- Aggregate limits - Aggregate limit is a maximum amount that an insurance policy will pay out over a specific period of time. For example, if you have a liability insurance policy with an aggregate limit of 1,000,000 THB, this means that the policy will pay out up to 1,000,000 THB in claims over the policy period, regardless of the number of claims made.
- Occurrence limits - Occurrence limits refer to the maximum amount that your insurance company will pay out for a single insured event. For example, if you have a car insurance policy with an bodily injury liability of 1,000,000 THB per person per accident occured, this means that the insurance company will pay out up to 1,000,000 THB for every single incident or occurrence.
How is the sum insured differently from the sum assured?
“Sum insured” is a term that is used in health insurance, car insurance, property insurance in the event of a covered loss or claim. The sum insured is determined before you purchase an insurance policy.
On the other hand, "sum assured" is used in life insurance policies. It is the amount of money that the insurance broker guarantees to pay out to the beneficiaries in the event of the policyholder's death. The sum assured is agreed upon at the time you buy a life insurance policy, the amount is determined based on factors such as the policyholder's age, health status, and income.
Definitions:
| Health status | Is how you perceive your health condition, including health care, medical history, and genetic conditions. |
| Illegal activities | Are activities that are forbidden by law, such as driving under the influence of alcohol or drugs. |