Definition - What does Sum Insured mean?
Sum insured is the amount of money that an insurance company is obligated to cover in the event of a covered loss. This term is commonly associated with homeowner's or property insurance. The sum insured amount is dependent upon the premium price that is being paid for the insurance coverage.
Insuranceopedia explains Sum Insured
The sum insured amount for homeowner's insurance is very important because if the amount is not equal to the full price of the home, then the homeowner could suffer significant losses if his or her home is destroyed. For example, if a home is worth $300,000, but the sum insured is only $200,000, the the homeowner could lose $100,000 worth of value if he or she experiences a total loss on the home. If the home has to be rebuilt, he or she may only be able to rebuild a $200,000 house and not a $300,000 one.