Buying life insurance is a significant financial decision in each person’s life. Today, when we are surrounded by multiple threats to our lives, the need to protect your loved ones against unpredictable situations is undeniable. But do you feel overwhelmed by the abundance of insurance options?
It is understandable for policy buyers to face difficulties when choosing the right insurance plan to ensure their family’s well-being. Since several insurance providers are offering a variety of benefits with different policies, it can get confusing. However, you can simplify the decision by taking into account factors such as the insurer’s claim settlement ratio.
Not many policy buyers may be aware of the role of claim settlement ratio in insurance purchase. Therefore, let’s discuss how it works in detail to understand why you should consider it before buying an insurance plan.
What is Claim Settlement Ratio?
Claim Settlement Ratio is used in the insurance business to measure an insurance provider’s efficiency to pay off the insurance claims. In simpler terms, it is calculated as the total number of claims approved by the insurer against the total number of claims received by them.
It is also referred to as the Claim Paid Ratio, and policy buyers can use it to determine the insurer’s reliability. Before buying an insurance plan, checking the insurer’s claim settlement ratio gives you a glimpse into their record of claim settlement.
An individual opts for the life cover from an insurance plan so that in case of an unfortunate incident, their family is financially secure and stable. If the insurance provider’s claim settlement ratio is high, it gives the policyholder confidence to choose the particular insurer.
Among other important factors to consider, such as the plan’s affordability and benefits, many policy buyers may not think to consider claim settlement ratio. But, it can help you choose the right insurer and the insurance policy.
Here are some ways a claim paid ratio can be useful for a policy buyer:
1. Comparing Different Insurers
There is no shortage of insurers offering life insurance plans with desirable benefits to its customers. But, buying insurance depends on your financial profile, which is unlike anyone else. Your ideal insurance plan will be determined based on your lifestyle habits, income source, medical history, and other vital factors.
Once you have mapped your requirements from an insurance plan, choosing the right insurer is the next step. Along with term insurance comparison, checking the claim settlement ratio of different insurers can serve this purpose. The insurer with a consistent high claim paid ratio suggests their commitment and reliability, which is crucial for policy buyers who put their family’s well-being in the insurer’s hands.
2. Creating A Strong Cover For Family
Anyone who buys life insurance is looking to create a financial support system for their loved ones to protect them from life’s uncertainties. It is especially crucial for families where the policyholder is the sole earning member of the family.
Therefore, creating a strong cover for them is a priority to ensure they remain financially independent in your absence. When you choose an insurer with a high claim settlement ratio, you can rely on their ability and intention to protect your family’s interests in a crisis.
3. Peace Of Mind
One of the most significant advantages of life insurance is the peace of mind it brings to the policyholder. But, the possibility of claim rejection remains a concern, discouraging some from buying an insurance plan.
Looking at the insurer’s claim settlement ratio can help put these worries to rest. A high claim settlement ratio also indicates the financial stability of the insurance provider.
Why Do Claims Get Rejected?
While buying insurance from an insurer with a high claim settlement ratio is favourable, it does not mean claim rejection is improbable. As the policyholder, you have to remain cautious of certain things to avoid claim rejection.
Here are some common reasons for claim rejection:
♦ Wrong Or Missing Information
Falsification of personal information when buying life insurance can affect the claim settlement process. When you are purchasing life insurance, information such as your age, income range, occupation, lifestyle habits (smoking/drinking) and other relevant details are required.
In case you fail to provide the correct or complete details, it may lead to claim rejection on the grounds of fraudulent behaviour.
♦ Not Providing Medical History
At the time of insurance purchase, policy buyers should disclose any existing medical conditions or habits such as smoking or drinking to the insurer as it impacts the policy premium.
Insurers may also require a medical assessment of the policyholder. Therefore, hiding medical history from the insurer is not a good idea. When claiming the policy, if any discrepancies are found, the claim may be rejected.
♦ Policy lapse
An insurance policy may lapse when the policyholder does not pay the premiums on time. A grace period of 15-30 days is offered after the due date of premium payment. In case the policyholder does not pay the premium within the grace period, the policy may lapse, and a lapsed policy cannot be claimed.