Buying Term Insurance? Don't Ignore Claims Settlement Ratio

 

When it comes to financially securing our loved ones, most of us rely on term insurance. Designed to provide life cover for the policyholder, term plans provide a lump sum pay-out to the family, if Life Assured dies within the policy term. Since term insurance (pure risk) plans offer only the death benefit and there’s no investment element, premiums are relatively low.

Moreover, with a term insurance policy, the deduction of premium upto Rs. 1,50,000 can be claimed under Section 80C of the Income Tax Act, 1961¹ subject to conditions mentioned therein. The death proceeds received from the term plan by the beneficiaries on the death of the policyholder is exempt from tax without any cap on the claim.

 Indeed, one of the primary reasons behind its popularity is its cost-effectiveness. However, it is important to assess all the pros and cons of a plan before deciding to invest in one.

So, what else does one need to check? The claim settlement ratio tops the list here.

What is a claims settlement ratio?

A claims settlement ratio (CSR) is the ratio of settled claims to the total number of claims received by the insurer and is calculated in percentage. For example, if an insurance company receives 100 claims, out of which 95 are settled, then the CSR is 95%.. For a term insurance company, the higher the ratio, the higher its credibility and the chance of a claim getting settled.

How to find the CSR of an insurance company?

It is important to check and compare the CSR figures before finalising a particular insurance plan. To help applicants, the Insurance Regulatory and Development Authority of India mandatorily publish a list of CSR figures of the registered insurance companies of the country in its annual report. You may also find the report on the IRDAI website. The CSR figures of each company change every year due to the varying numbers of claims and settlements. Thus, it’s advised to rely on the 5-year average figures to get a clear understanding of the credibility factor. The list provided by IRDAI contains these average figures too.

Can High CSR always ensure claim settlement?

No. Despite the insurer having high CSR figures, a claim can get rejected. The following can be the reasons for the same.

• Discrepancy in medical records

  If you haven’t disclosed your past medical issues and actual health conditions like surgeries, cardiac issues or smoking habits, it might create a discrepancy in your records. In such a scenario, the death claim by your nominee can get rejected.

• Documentation errors

  It is important to cross check the details filled in the application form. Sometimes, erroneous, incomplete or misleading information can creep in, particularly if an agent or third party has helped to fill the forms, and can consequently lead to claim rejection.

However, all of the above-stated problems can be avoided, making death claim settlements a smooth process. Just remember not to ignore the claims settlement ratio while buying term insurance.

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ARN - ED/08/23/3727