Buying a term insurance policy is one of the best things that you can do for your family. We all know that life is uncertain, and that is why taking the right measures for your family’s security is very important. Term insurance plays a vital role in supporting your family financially, especially at the time when you are not there anymore with your family. Many term insurance plans provide the sum assured with which one can even get rid of debts. However, buying a term insurance plan, the only thing we need to be sure of is the claim settlement ratio, as it helps in determining whether the sum assured can be claimed smoothly. So, let us discuss the term insurance claim settlement ratio here today.

What is Claim Settlement Ratio?

Claim Settlement Ratio signifies the number of claims that have been paid against the number of claims that have been made in a year. You should only go with the insurance companies that have a higher claim settlement ratio. It indicates many things about the reputation of the insurer in the industry. Therefore, it is quite important to check the claim settlement ratio of a company before you buy a certain term insurance plan.

Each year the Insurance Regulatory and Development Authority of India (IRDAI) releases the claim settlement ratio of all the life insurance companies. The claim settlement ratio determines the return you will get after putting so much effort for so many years.

At the time of the claim settlement process, the settlement is defined on the basis of the percentage of the total number of claims that have been paid put by the company from which you have bought the term insurance plan. To do this, one has to calculate the total numbers of claims received vs claims settled. Taking, for example, if the company that you chose has a claim settlement ratio of 98%, it means the company has settled 98 claims out of 100. The remaining two claims have been rejected.

Things to know about insurance claim settlement in India:

Here are some key points that you must consider while choosing a term insurance plan from a particular life insurance company.

  • The claim settlement ratio is done by calculating the total number of claims that were approved and received
  • This is always measured for each of the insurance products for each of the insurance companies. The claim settlement plan is for the term insurance plan as well as ULIP plans. It is not implied for a single product of a life insurance company
  • The settlement ratio must be consistent; thus, you should check the claim settlement ratio of the last five years of a company. Only if you find consistency, you should take the next step
  • You must check the annual report on the settlement ratio of the private and public insurance companies released by the IRDAI. You can find the report on the official website of the insurers
  • You must also check the number of claims that the insurance company has received.

How is the claim settlement ratio calculated?

The process of calculating the claim settlement ratio may appear to be a bit complex for some; however, a little effort can make things easier. Also, to get a better idea of the settlement ratio, understand the factors is important.

Let us take this formula: Claim Settlement Ratio = claims that are paid/claims received in a year

For example, if a company receives 5,00,000 claims from its customers, and settles only 4,00,000 out of them, the claim settlement ratio will be around 80%. This means, the insurer has paid the sum assured to only 80% of the customers, and the rest of the claims has been rejected by the company.

Finding facts about the claim settlement ratio of an insurance company is very important as it will give you an idea of whether the beneficiary of your term insurance plan can get the sum assured or not. The companies that reject even 20% of the insurance claims may even reject yours. Therefore, you must look for an insurance company that settles the maximum number of insurance claims and maintains a balanced reputation in the industry. You can at least have the assurance that the money you are putting today in the term plan, can be used by your family when you will not be there to take care of them.