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Importance Of The Claim Settlement Ratio When Purchasing A Term Insurance Plan

In modern times, term insurance is one of the most important requirements for an individual, considering the extent of the uncertainty of jobs and health. It is important to plan for such uncertainties, particularly if your family depends on your income for their survival.
 

A term plan is an excellent way to safeguard the future financial stability of your family.
 

Therefore, let us delve a little deeper into what term insurance claim settlement ratio1 is and how it is important for you. 
 

What is the Term Insurance Claim Settlement Ratio1?
 

Term insurance claim settlement ratio1 is the percentage of the number of claims settled by an insurer with regard to the total number of claims submitted to them in a particular policy year. It is calculated by dividing the total number of claims accepted and settled by an insurer by the total number of claims received by them.
 

The Insurance Regulatory and Development Authority of India (IRDAI) releases information about the claim settlement ratio of different life insurance companies for every financial year.
 

Why is The Claim Settlement Ratio Important for Purchasing a Term Plan?
 

While purchasing term insurance online, you should check the claim settlement ratios1 of various insurers and use it as one of the parameters for weighing a policy. Here are the reasons why the claim settlement ratio is important:
 

  1. To understand an insurer's credibility:Term life insurance is one of the most important investments in your life. It ensures a death benefit for your family to enable them to fulfil their financial commitments in your absence. Therefore, it is important to understand the insurer's credibility to ensure that they can be trusted to honour their end of the deal in a term plan.

    If your claim gets rejected for some reason, then the whole idea behind your investment plan is negated. Thus, you need to be aware of the claim settlement ratio1 of an insurer before buying a term plan from them.

  2. To safeguard the financial future of your family:If the claim settlement ratio1 of an insurer is above 85%, you can consider them to be reliable. The more the ratio, the better is the performance of the insurer. If the ratio is more, you can be sure that your family's financial future is secure. It is your responsibility to ensure that the lump sum death benefit reaches your family in your absence, and selecting an insurer with more claim settlement ratio is an easy way to do so.

  3. To have ease in claim settlement:When the term insurance claim settlement ratio1 is at the enhanced end, it signifies that the claim settlement process of an insurer is happening at a robust pace. Therefore, you, as a customer, can be assured of the fact that your nominee will go through an easy and convenient procedure to get the claim settled in the wake of your demise.

  4. To ensure swiftness of claim settlement:Another important aspect of a term insurance claim, aside from the convenience of the process, is the time required for the claim process. The quicker the lump sum amount reaches your family, the lesser the financial burden on them..

 

How Can Claim Settlement Guide You While Buying Term Insurance?
 

Now that we have discussed the importance of the claim settlement ratio1 in life insurance, let us know the factors you need to check when you buy a term policy:

  1. The number of claims received:An enhanced settlement ratio is a good measure to understand the reliability of your insurer. However, it is even more important to know the number of claims received to assess the ratio. For instance, if your insurer has received 50 applications and settled 45 among them, the claim settlement ratio is 90% which is certainly a fair value. However, an insurance provider receiving 500 applications and settling 450 among them is more reliable considering the quantum of claims handled.

  2. Consistency:When you purchase a term insurance plan while considering the claim settlement ratio, you must check for consistency. The selected insurer must have maintained more claim settlement ratio over a long period. A consistent performance from the insurer should increase your confidence in purchasing a term insurance plan from them.

The claim settlement ratio1 differs from one company to another. Before purchasing a term plan, remember to understand the claim process of the selected insurer, analyze it with other insurers, and choose the plan that you think will benefit you the most. 
 

Conclusion
 

A term insurance plan is regarded as one of the best ways to secure your family's financial future. It will provide the sum assured to your nominee in case of your unexpected death. However, ensuring that your nominee will receive the lump sum death benefit is crucial for the investment.
 

The term insurance claim settlement ratio1 of an investor is, thus, an important criterion in this regard. It will let you know about your insurer's credibility to settle claims and the ease and speed of processing it for your benefit. You must consider the number of claims received and the consistency of an insurer to ascertain their reliability.
 

L&C/Advt/2023/Jan/0314

 

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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

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Disclaimer

  • Insurance cover is available under the product.
  • The products are underwritten by Tata AIA Life Insurance Company Ltd.
  • The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.
  • For more details on risk factors, terms and conditions please read the sales brochure carefully before concluding a sale.
  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.
  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.
  • 1Individual Death Claim Settlement Ratio is 98.53% for FY 2021 - 22 as per the latest annual audited figures.