Sum Insured

In Australian insurance terminology, the sum insured is the predetermined monetary value of your insurance coverage, representing the maximum benefit payable under the policy. For life insurance, it's the lump sum paid to your beneficiaries upon death. For TPD (Total and Permanent Disability) insurance, it's the amount paid if you become permanently unable to work. For trauma insurance, it's the payment made upon diagnosis of a specified critical illness. Choosing the appropriate sum insured is one of the most important decisions in insurance planning. Australian financial advisers typically recommend life insurance sums of 5-10 times annual income, or enough to cover outstanding debts plus 5-10 years of income replacement for dependents. The sum insured directly impacts your premium - higher sums cost more but provide greater financial protection. Under Australian regulations, insurers must clearly state the sum insured in the policy schedule and PDS. Many Australian policies offer indexation, where the sum insured automatically increases annually with CPI to maintain purchasing power over time. You can typically increase your sum insured (subject to underwriting) or decrease it (usually without reassessment) during the life of the policy. Some policies offer guaranteed insurability options, allowing you to increase the sum insured at specific life events without health checks. When comparing policies, ensure you're comparing equivalent sums insured, as premium differences may simply reflect different coverage amounts rather than value differences.