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Claim Settlement Ratio Key to find the Right Term Insurance Plan

By PolicyBazaar
  | Published: 10 December 2019 | Last Updated On: 08 February 2021

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Buying term insurance is one of the most important financial decisions that everybody should consider. Term insurance plans are the most fundamental type of life insurance that provides pure risk protection by offering a death benefit to the nominees of the insured in case of premature demise of the policyholder. If you already have all your investment plans in place and are only seeking risk cover then term insurance plan is the right choice to make.

Buying term insurance plan is crucial because it acts as a safety mechanism for the family to protect them against the loss of income due to the demise of the sole breadwinner of the family. Hence, it is ardent to consider the various determining factors of term insurance plan while buying.  Out of all the factors, the CSR or claim settlement ratio of the insurer being the most important factor urges you to be cautious on this part.

We know your mind is flooded with multiple doubts now. Fret not! to clear all your doubts and queries and to help you choose the best insurance plan today, we’ll talk about Claim Settlement Ratio, key to find the right term insurance plan.

Claim Settlement Ratio (CSR)

Claim settlement ratio or CSR is defined as the percentage of cases settled by the insurance provider to the total number of cases received.

Let’s say, for a given insurance provider if the claim settlement ratio is 98%, this means that the provider has settled 98 cases out of the receive 100 cases.

In the example mentioned above, ‘98’ cases had been settled successfully but the remaining ‘2’ cases were rejected by the insurance provider. Insurance companies may reject a claim for multiple reasons such as fraud, impersonation or wrong presentation of claim details.

The claim settlement ratio of an insurance provider often gives a clear idea of all the claims settled by the insurance company in a given year. Choosing an insurance company solely based on the claim settlement ratio is never a good idea. Various other factors such as customer service, variety of plans, monthly premiums, and the cover should be considered as well along with the CSR.

Why Term Insurance?

A term insurance plan provides a death benefit in the form of sum assured to the beneficiaries of the insured, in case of any unfortunate event that occurs within the policy period. However, if the policyholder survives the policy period then the nominees are not entitled to receive any benefit. Term insurance plans do not provide any sort of maturity benefits. Term insurance plans come with various additional riders like critical illness, total or permanent disability benefits, accidental cover, etc. which enhances the overall coverage of the term insurance plan. While choosing term insurance one should be able to replace the current income and settle all outstanding financial liabilities like a credit card, personal loan, mortgage, etc. The thumb rule says you should choose your cover amount equivalent to 8-10 times your annual income plus outstanding debts. Term insurance plans are highly flexible offering multiple choices. You can opt for monthly, quarterly, half-yearly or single payment options depending on your convenience.

In a Nutshell

The claim settlement ratio is one of the best indicators to understand the quality of life insurance that is currently available for customers. All insurance providers with CSR above 80% are considered to be credible since it has honored most of the claim cases that were received. There might be several reasons for rejecting a claim.

Although the claim settlement ratio or CSR is an important decisive factor for choosing the ideal term insurance plan, you should not narrow down the choices to one specific insurance provider only based on the claim settlement ratio.