How Does Claim Settlement Ratio Impact Term Plan Purchase?

From an insurance agent coming to homes to an individual buying an insurance policy, there’s a series of processes involved to persuade policy buyers in making a decision. There are certain things that the insurers willingly share with their policyholders to help them in making the right policy buying decisions. This is why many policyholders feel satisfied with the coverage they get under a plan. While buying life insurance, you must pick the right company that has a high claim settlement ratio and good reputation.

Claim settlement ratiois the result of the number of claims settled divided by the number of claims received by an insurer in a certain period. The claim settlement ratio is expressed in percentage.

A high claim settlement ratio improves the chances of your term insurance claims being settled. As a smart investor, you should compare different insurance companies’ claim settlement ratios when choosing a term insurance plan.


Why Is The Claim Settlement Ratio So Important?

Because it is the only factor that determines how much claims have been settled by the insurance company in a financial year. This can be well-cited with an example:

If the claim settlement ratio is 99%, then it implies that

  • The insurance company has successfully paid out 99 insurance claims out of every 100 claims received.
  • The insurer might have to reject the remaining 1%of claims on various grounds.


Other Factors To Be Considered While Buying A Term Insurance Plan

We all know the importance of a life insurance plan and its role in keeping our family financially secure. If you are the only earning individual of your family, you must buy a term life insurance. As a life insurance policy, term insuranceprovides coverage for the family’s income loss upon the earning member’s death.

As there are many insurance plans available in the market, you must select the best one that meets your requirement. The claim paid ratio is one of the most important factors to check before buying a term plan. Apart from CSR, the following are some of the other factors that should be kept in mind when purchasing a term plan.

  1. Coverage
  2. Available riders
  3. Insurer’s reputation
  4. Financial budget
  5. Tenure of your plan


Calculate the coverage amount before buying a policy. One should buy a policy with a life coverage of at least 8-10 times his gross annual income. The premium paid also helps during tax filing or filling ITR forms.It also makes it easy for the taxpayer to determine their tax liability, assess the tax payments, and requesta refund for its overpayment.

Available Riders

Term insurance plans come with additional riders or add-ons that can be chosen in conjunction with your term plan to maximize the benefits and coverage. Some of the significant term riders insurance include critical illness coverage, accidental death, waiver of premium on disability, and waiver of premium. Depending on their additional benefits, find out which of the add-ons you need.

Insurer’s reputation

Choosing the right insurer plays a vital role in selecting the best term plan. To choose the best insurer, check for the company’s claim settlement ratio and solvency ratio. A solvency ratio refers to the insurer’s ability to take care of its debts. An insurance company will provide good returns only when they have a strong ability to meet its short term and long-term liabilities.

Financial budget

While evaluating the available options, you should consider whether the sum assured will meet your family’s future requirements. Considering the increasing inflation rate, you can use an online term insurance calculator to calculate the premium you would need to pay. Today, almost every insurance companies provide this online term insurance calculator on their website.

Moreover, buying a term plan online can benefit you in a low premium and high coverage as it eliminates the third-party charges. The best part is – You can also use term insurance calculator it to analyse term insurance tax benefits you can avail. It helps in getting tax benefits under the Income Tax Act.

Tenure of your plan

Once you have finalized the amount of coverage you need, find out till what age you need the life insurance cover. A life insurance policy tenure should not be too short, as the policy might lapse before your financial goals are met. However, it should not be too long as you will need it after completing your financial obligations.

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