Is the Claim Settlement Ratio the only aspect to consider before buying a plan?

Understanding the Full Picture of Insurance Policy Selection Beyond Claim Settlement Ratio

Insurance is a very important financial tool, but much like any other instrument to grow your economic stability, you need to choose the right one. It can be difficult. Several factors affect how you select your insurance, whether health, life, or anything else.

One of the primary factors is the claim settlement ratio. However, other aspects matter. Let’s take a closer look at what the claim settlement ratio is, how term insurance claim settlement ratio matters, and what other aspects to consider when buying a policy.

What is the claim settlement ratio?

The claim settlement ratio realistically depicts how many claims the insurance company has successfully paid off. Thousands of claims are made every month, but some may or may not be genuine.

The claim settlement ratio is calculated using a very simple method. All you need to know are how many claims they received and how many were processed. Then, divide the latter by the former.
For instance, let’s say a company received 10 claims, but only 8 of them were genuine and settled. That means the claim settlement ratio of that insurance provider is 80, which is a very good number.

How does the term insurance claim settlement ratio matter?

The claim settlement ratio gives you an idea of the reliability of the insurance provider. However, you need to consider how many claims they received. If a company only received 2 claims and settled 1, their ratio will be 50, but that doesn’t mean they are unreliable.

How term insurance claim settlement ratio matters are it tells you how likely the insurance provider is to settle your claim at the time of need. If you have a term insurance plan and an unfortunate accident befalls you, your family needs to be in good hands to receive the sum assured so their financial needs are met. That is how term insurance claim settlement ratio matters.

Take into account the company’s reliability. Were their claims settled if other insured individuals paid their premiums on time and for the entire prescribed duration of their tenure? That tells you whether the insurance provider is reliable.

Some individuals buy term insurance but fail to make their premium payments due to extenuating circumstances such as financial drawbacks, poor financial planning, and sometimes due to irresponsibility. While facing financial issues can be tough, the insurance provider is still taking a huge risk on individuals who do not pay their premiums. Therefore, their claims may not be settled, or only part of their claims equivalent to the premiums paid may be settled if such clauses were previously specified.

Such irresponsible financial planning from the insured individual could inadvertently hurt the claim settlement ratio of the insurance provider. So, it is important to take into account exactly how many viable claims were settled. The term insurance claim settlement ratio matters because it provides a basic idea of whether or not the insurance provider can be trusted to look after your family in the case of your untimely demise.

What other factors are pivotal when choosing an insurance plan?

Even though the claim settlement ratio is pivotal in choosing your insurance provider, it is not the only factor that matters. Here are some important aspects to take into consideration when choosing your term insurance provider and a viable plan to secure your family’s financial future:

1. Sum Assured – The sum assured is the amount of money that the insurance provider pays to your family in case of an early and unexpected demise. Your family will already feel rattled by their personal loss. Financial planning, paying bills, loans, mortgages, etc., are farthest from their mind at that time. Receiving a lump sum amount of funds as a death benefit at such trying times can help them deal with their finances without stressing out while they take the time to grieve.
   The sum assured needs to be enough to sustain their lifestyle for at least 6-18 months.

2. Term insurance tenure – Term insurance is one of the best life insurance options because it allows you to choose a plan extending anywhere from 10-100 years. Due to the option for shorter-term policies, the premium is also lower.

You need to consider the tenure of your term insurance policy. If the offered tenure is too short and has no perks, such as return on premium, money-back plans, endowment, or ULIP plans, then it could be considered unfruitful. After all, the span of your life cannot be predetermined, but it certainly should not be too short or too long. Make sure that you have a range of tenure options.

3. Rates of Premium – One of the biggest perks of term insurance is the lower rates of premium. If the premium seems too high, how term insurance claim settlement ratio matters is you expect more reliability from your insurance provider.

You need to know that if the rate of premium is high, then your family is guaranteed to receive their claim when an unfortunate demise cripples their livelihood. Even if you leave the claim settlement ratio out, you still need a reasonable premium rate that encompasses your sum assured and add-ons or riders but doesn’t financially burden you.

4. Benefits – Term insurance comes with several perks. You can also partake in endowment plans or ULIPs that help you earn more money from the premiums paid towards your term insurance policy. The insurance provider takes care of certain investments and pays you interest.

There are also money-back plans wherein the insurance provider pays back a specific sum from your premiums collected over the years at regular intervals during your term insurance. You can also choose from various options, such as an increasing term plan that increments your sum assured every year. This decreasing term plan helps pay your loans and decreases the sum assured along with your family’s financial burden or even a TROP. The TROP plan is also called return of premium, as the insurance provider refunds your premiums if you survive the tenure of your insurance plan.

5. Riders—Add-ons to your term insurance plan, such as critical illness benefits, accident benefits, disability benefits, etc., are excellent ways to ensure that you will eventually get some money to pay your bills. Make sure you have appropriate riders available.

Conclusion

While claim settlement ratios matter, they are not the only factors to consider. Choose an insurance provider who has a high claim settlement ratio but consider the other aspects before definitively purchasing a term insurance plan.

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