Understanding claim settlement ratio: Why it matters when you buy Term Insurance Plan
Term Insurance Plan is one of the most popular Life Insurance Plans in the market, and for good reason. They promise a large sum assured for your family if the worse happens and you are not there. Combine that with low premiums that stay unchanged throughout the policy tenure, and you have a winner!
You might feel like connecting with your agent right now and getting a term insurance plan for yourself, but we urge you to wait! The promise is good, but you need to make sure that the promise is kept in your absence. How can you do that? Is there a way to make sure that the chances of getting the sum assured are high?
Yes, there is. Claim Settlement Ratio is your answer!
WHAT IS THE CLAIM SETTLEMENT RATIO?
It is the number you will read on almost all insurance companies websites. It is an important indicator to understand the ability of a company to deliver all the benefits to your nominees in case misfortune strikes. Generally speaking,
It is the ratio of the total number of claims approved by the company to the total number of claims received. For example, let’s say an insurance company received one hundred claims in a fiscal year. Out of these, two claims were rejected and 98 were approved and settled. Then the Claim Settlement Ratio of the company would be 98 percent.
This ratio helps not just in the case of a Term Insurance Plan, but for every other insurance product. Note that it is calculated for each fiscal year, so make sure the Claim Settlement Ratio being advertised to you is the latest figure.
HOW IS IT CALCULATED
Without getting too technical here, it is a simple ratio presented in terms of percentage. Allow us a little math here,
CSR = (Total claims settled in a financial year/Total Claims in a financial year) x 100
Please note that though it is very important, Claim Settlement Ratio is not the sole indicator of the company's stability. More on this later. For now, note that a ratio of 95 percent or higher for a term insurance plan is considered good.
IMPORTANCE OF CLAIM SETTLEMENT RATIO
Since it is a standardization done by IRDAI (Insurance Regulatory and Development Authority of India), it is a requirement for every insurance company. Therefore, it helps you assess the company's financial security to an extent.
It helps you by providing a surety on the company's promise to you. You can relax knowing that the financial security of your loved ones is assured.
HOW VALID IS THE CLAIM SETTLEMENT RATIO
As we said, the claim settlement ratio is not just calculated for term insurance plans. It is required for every product, and some reasons make it less indicative than possible.
- Early Claims: Sometimes, the customers make their claims within three years of purchasing the plan, which might get rejected on the grounds of being an early claim and will investigate the case thoroughly before processing the c. This is in adherence to Section 45 of the Insurance Act but lowers the Claim Rejection Ratio.
- Fraud Policies and Claims: Sometimes, out of the large number of life insurance policies sold, a few turn out to be fraudulent, which negatively impact the insurance company’s Claim Settlement Ratio.
Thus, in most cases, the rejection of claims is well justified on the insurance company's part. However, note that these rejections make up a very small part of the total claims for most companies. For example, Edelweiss Tokio Life Insurance has a 97.01 percent claim settlement ratio!
WHAT ARE THE FACTORS THAT CAN LEAD TO THE REJECTION OF A CLAIM?
If you read all the documents and terms and conditions carefully, there is nothing to worry about. You just need to submit all the right information. For example, in a case where the claim is rejected, there might be:
- Some type of non-disclosure on the customer's side. It is not a good idea to hide a health condition to get a lower premium because sooner or later, that is sure to come out. In that case, the claim will be rejected.
- A commitment of fraud. If the company suspects you of withholding information and trying to cheat, then your claim will be rejected.
- A lack of understanding. The customer might fail to follow the terms and conditions properly and, as a result, might overlook an important detail or procedure, leading to claim rejection.
- An error in updating the nominee. This is rare, but if there is no nominee, the claim might get rejected. In some cases though, companies can settle claims based on a succession certificate in case there are no nominees.
All these rejections are easily avoidable. They reflect negatively on the claim settlement ratio, and the company tries its best to avoid that.
HOW CAN YOU SELECT THE BEST TERM INSURANCE PLAN?
Simply put, Claim Settlement Ratio is indicative of a company's health to a certain extent only. Therefore, you need to consider some other factors to properly decide what the best Term Insurance Plan for you is.
- Take inflation into account and see if you can get the best possible sum assured for your family or loved ones. Since this benefit ensures your family's financial stability, please choose the amount carefully.
- Consider the riders offered to you by the company. These riders help in customizing the plan to your liking and convenience.
- Choose the policy tenure carefully. It should provide you cover till your retirement, ideally. So the rule to follow here is going for a term period which is the difference between your assumed retirement age and your current age.
- If possible, go for a policy that gives you a return of premium option, which entitles the policyholder to get the premiums back in case they outlive the policy term
If you pay heed to these things, you will end up with a correct plan for you. Therefore, the right plan must have the flexibility to be personalized to your needs.
For example, Edelweiss Tokio Life Insurance offers that flexibility in the form of the Zindagi Plus Term Insurance Plan.
CONCLUSION
Being well informed about all aspects of insurance is a must, especially when looking to buy a particular life insurance plan. With a clear understanding, you will be able to make an informed decision since so much depends on it.
Choose a Term Insurance Plan that caters to your requirements. Next, you need to make sure that the promise of a better future is kept. Referring to the claim settlement ratio of an insurance provider is a good practice to adopt for this purpose. Edelweiss Tokio Life Insurance is one such company that has a habit of keeping promises, so you can check their website and drop your contact information there. Reliability is a phone call away.
The above-mentioned article is sponsored feature, This article is a sponsored publication and does not have journalistic/editorial involvement of IDPL.