Insurance policies cover specific events - like hospitalization, a trip delay, or an accidental injury. Sum Insured is the minimum amount an insurance company will pay on the occurrence of such an event. You are simply paid the entire amount, irrespective of the actual financial loss suffered.
This term is largely used in products like Term Life Insurance, Accident Insurance.
Sum Assured is like a lottery ticket. If you win, you get the money - no questions asked.