Death is inevitable and so is the financial circumstances that tag along with it. This unforeseen impact on the financial health of the family of the deceased is quite harsh. This is the reason why more and more people should invest in term life insurance. Life insurance comes as a great relief during these testing times and provides financial security to the dependencies of the deceased.
Selecting the perfect term insurance plan for your family and you, is a crucial task. Even though all life insurance plans provide financial aid after the death of the policyholder, some plans have additional benefits, based on which you can compare various plans and choose the right one for you. One such deciding factor can be the claims settlement ratio.
Every insurance company has a claims settlement ratio, a numerical feature, which is the total number of claims settled by the insurance company out of all the claims received, during a financial year. This element of an insurance company can be used to your advantage while checking the reliability of the company in terms of paying the claims.
The formula for calculating the claims settlement ratio is: (Total number of claims approved)/
(Total number of claims received) x 100. The claim settlement ratio is calculated for all the products like ULIP’s, term plans, etc. The Insurance Regulatory & Development Authority of India (IRDAI) makes the ratios of all the companies public in the first month of the calendar year. This helps in keeping the public informed of the changing ratios every year.
Importance of claims settlement ratio in insurance
Claims settlement ratio has immense importance in the insurance sector and plays a great role in the term life insurance policy you choose. The basic significance of a life insurance plan is the financial safety they offer after the demise of the insured. The ratio portrays the credibility of the company in terms of settling the claims of the beneficiaries. It ensures that your family gets the financial help they require after you. Companies with a low claim settlement ratio automatically show the incompetent practices of the company.
You mustn’t indulge in investing in a life insurance plan which offers a low premium with an inferior settlement ratio. Often the claims settlement ratio factor is overshadowed by other attractive benefits and incentives. The whole purpose of an efficient insurance plan is its ability to provide excellent claim settlement service in a time of need.