Claim Settlement Ratio: One of the Most Important Factors While Buying a Term Insurance Plan

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Term life insurance plans are a basic and effective way of financially securing our family. They are designed as a protection plan that covers your family against unfortunate situations like your death or disability. It is a plan that spans over a fixed period of time. If the policyholder dies during the policy tenure, the family will get a pre-determined amount of money as financial support. This makes a term policy a plan made purely for protection. However, buying a term policy is not as simple as you may think it to be. One of the major concerns while buying a term insurance policy is deciding which insurance provider you should opt for. That decision is based on many evaluating factors about term insurance. One of them is the claim settlement ratio. 

Claim settlement ratio is essentially a measure of how reliable an insurance provider is. Hence, it is one of the most important factors to remember while choosing a term plan. Here’s everything you need to know about claim settlement ratio: 

What Is Claim Settlement Ratio?

The simplest explanation of claim settlement ratio is that it is the number of insurance claims settled by the insurance provider in a particular year. It also reveals how likely it is that the provider will settle your claim. This percentage is determined by taking the total number of settled claims out of the total amount of claims submitted by policyholders for a specific period. In India, the claim settlement ratio for an insurance company is calculated for every financial year. This ratio is published by the Insurance Regulatory and Development Authority and made available for the public to view.

Why Is Claim Settlement Ratio Important? 

  • Ease of processing claims

It is said that it is better to be prepared than sorry. While term insurance is based on that principle, claim settlement ratio is the tool that that signifies it. Claim settlement ratio is a measure of how good an insurance company is with claims. This assessment includes every part of the claim process, including how efficient the process is. Hence, if you do not want your family to face any hassles or delays while making a claim, you need to look at the entire procedure of claims processing and then look at the claim settlement ratio. The act of making a claim should be easy and simple for your dependents. A good claim settlement ratio makes sure that is the case.

  • Speed of settling claims

Losing a loved one is a tough experience for family members. Hence, the last thing your family would need is delay in receiving the claim amount. You can make sure of that by buying a plan from a company that has a satisfactory claim settlement ratio. If a higher number of claims have been settled in a short time, it means that the company is quick in disbursing the amount payable to your family. Hence, you should always look for a company that offers quick settlements.

  • Ability to pay the claim amount

As long as your claim is solid, any insurance provider will say they are willing to pay the claim amount. But the important question is, are they capable of paying the amount? The claim amount for term insurance policies is usually very high. Therefore, there could be a situation where your claim is delayed because the insurance provider cannot pay your family right away. 

If the ratio of claims settled vs. claims received for the insurer is close to equal, it means that the insurance provider was able to pay most of the claims that were submitted. Another factor you can check is the solvency ratio that determines whether or not your insurer has enough ability to meet its debt obligations and other financial commitments. While IRDAI mandates all life insurers in India maintain a solvency ratio of at least 1.5 or 150%, you should ideally go with a company that has the highest ratio amongst their competitors.

Hope this helps you understand why claim settlement ratio is one of the most important factors one must check before buying a term insurance plan. Use a term insurance calculator and get started on securing the life goals of your loved ones today!

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