Why should you consider the Claim Settlement Ratio when choosing Insurance?

A life insurance policy is a financial safety net that helps protect your family’s future. A claim settlement ratio determines the reliability of an insurance provider in providing the benefits promised to your beneficiaries in the event of your untimely demise. The concepts can seem confusing, so let’s take a closer look. 

What is life insurance?

A life insurance plan is a financial contract between the policyholder, which is you or a loved one, and the insurance provider. The contract states that if the cause of the contract is fulfilled, the insurance provider will pay the insurance claim.

‘What is life insurance’ is a concept that is easier to understand if you consider the factors of the policy plans. A life insurance payout is claimed if the insured meets their death within the policy tenure. The terms of a life insurance plan are the sum assured, policy tenure, rate of premium, premium frequency, premium tenure, riders, and cause of death.

The factors affecting life insurance policies

The various factors that affect ‘what is life insurance’ play pivotal roles in the policy and the claim settlement ratio. Here is what each factor means:

1. Sum assured – It is the amount of money that the insurance provider promises to pay your beneficiaries in the event of the policyholder’s demise.
2. Rate of premium – Based on the sum assured, riders, and policy type, the insurance provider determines the rate of premium. It is the amount of money that you must invest in your life insurance policy to reap the benefits.
3. Policy tenure – It is the length of the life insurance policy. Based on the type of plan, such as whole life insurance, term life insurance, etc. the policy tenure can be anywhere between 10-99 years.
4. Premium tenure – The premium that you need to pay to the insurance provider is limited to a number of years as per the policy type. The duration of paying premiums towards your life insurance policy may be a lot shorter than the actual policy tenure.
5. Premium frequency – The total premium that you are expected to invest in the life insurance policy is divided into smaller amounts to be paid at regular intervals. The amount to be paid at each node of the policy frequency is determined by the total expected premium and the premium tenure. You can choose single-premium payments, monthly payments, or annual payments.
6. Type of policy – The type of life insurance policy differs based on your needs to invest in your family’s future and your current financial plans. There are different types of life insurance policies, such as endowment plans that help you earn bonuses, ULIPs that let you invest in the current market, Term plans that are affordable, and more.
7. Riders –  You can add additional financial protection to your life insurance plans such as return of premium, critical illness coverage, etc. These add-ons are called riders because they can only be included with a base plan. They offer added benefits such as treatment costs, or refunding the premium you invested in the life insurance plan and more. Different riders serve different purposes so you can choose the ones that suit your requirements. Each rider adds a small amount to the premium rate.

These factors affect what is life insurance and how you can benefit from a suitable plan.

What is a claim settlement ratio?

Once you purchase the life insurance policy, the event of your demise must correspond to the terms of the contract. The cause of death, premium paid, and policy tenure play a role in determining if your beneficiaries can successfully file a claim to receive the death benefit.

The claim settlement ratio of the insurance provider is a factual number that informs about how many claims they have resolved. The claim settlement ratio is determined by comparing the number of legitimate claims that were filed by policyholders and the number of claims that the insurance provider resolved.

To guarantee the financial security of your loved ones, you must choose an insurance provider who has a high claim settlement ratio. The higher the claim settlement ratio, the better the chances of your beneficiaries receiving their payout in the event of your unfortunate demise.

Claim settlement ratios consider legitimate claims, i.e., claims on life insurance policies filed due to causes of death that were included in the contract. Violating the terms of the life insurance policy may affect the settlement process.

Conclusion 

The claim settlement ratio speaks to the reliability of the insurance provider. It is a major factor in determining if the insurance provider with whom you wish to purchase your life insurance plan will pay the sum assured to your beneficiaries.

The insurance provider is legally bound to follow through on the terms of the contract as discussed with the policyholder during the purchase of the plan. Therefore, it is important to check the claim settlement ratio of the insurance company when buying a policy.