Sum insured is the maximum value for a year that your Insurance Company can pay in case you are hospitalized. Any amount above and beyond the sum insured will have to be taken out from your own pocket.
For instance, suppose your sum insured is 2 lacs and you are hospitalized twice in a period of 12 months. In the first incident your hospital bill is 70 thousand. In the second incident your hospital is 1.5 lac. Hence, your total hospital bill for the year is 2.2 lacs. The insurance company will pay only 2 lacs of this amount while the remaining 20 thousand need to be cleared by the insured person.
Therefore, it is always advisable to have a sum insured of a large amount. However, this would mean paying a bigger premium as well.
Recently, medical expenses have gone up exponentially and the exorbitant medical fees are a big burden for the common man. In such a scenario, it is always advised to have a decent Health Insurance policy which protects you against the risk of a financial tragedy. Bigger the sum insured, larger the protection.