Insurance policies cover specific events - like hospitalization, a trip delay, or an accidental injury. Sum Insured is the maximum amount an insurance company will pay on the occurrence of such an event. It is like a refund of the loss occurred, calculated as per the terms and conditions in the policy.
This term is used in products like Health Insurance, Car Insurance.
Sum Insured is like a strict accountant - who pays you for your expenses against bills and company policies. Someone who keeps pai pai ka hisaab.