The sum insured is the amount used to define the scale of protection under an insurance policy. In many non-life contracts it sets an upper limit for covered losses, while the actual claim payment still depends on the loss and policy terms. Related terms include sum assured in life insurance and limit of indemnity in liability cover.
A Kathmandu shop should consider current stock values and rebuilding costs when setting its sum insured. Choosing an artificially low figure can cause underinsurance and reduce a claim beyond the stated ceiling. A high sum insured also does not guarantee payment above the covered loss under indemnity-based insurance.