Decoding the Claim Settlement Ratio for Your Term Insurance Plan

Sometime back in the past, we used to despair the number of people that would never come to wrap their head around how term insurance is the ultimate life insurance product that they actually need. However, those are the days that are far gone. In today’s time, select the right type of term insurance plan has become a cakewalk, one simply needs to go out there and just buy a term plan. Unlike the other products of life insurance such as endowment plans or ULIPs, term plans are very affordable and in every essence, a true insurance tool.

However, it is not as easy as one might think to choose the right type of term insurance plan from the options that are available. The different insurance providers in the market make different claims on why their term insurance policy is superior as compared to the other competitors’ in the market. While some may claim that their plans offer quite a high amount of life cover at affordable premium charges, others may emphasize about the waiver of the premium charges in case of a critical illness diagnosis or any disability faced by the policyholder. So, which policy out of the many is the one that you can completely trust to look after your loved ones when you are no longer around?

To help you and make this choice slightly easier, let’s discuss an important factor that comes into the picture when we talk about opting for a term insurance plan – the claim settlement ratio. In simple words, the claim settlement ratio of an insurance company depicts the number of cases in which the insurance provider has paid out the promised sum assured out of the total number of such claim requests that are received by the company on the demise of the policyholder. Let’s say if a company has a claim settlement ratio of 95%, it indicates that out of a total number of 100 claims filed, the insurance provider has honored 95 of the claims while rejecting 5 of them.

Consider this figure or ratio as a metric that helps you in determining the probability of an insurance provider paying out the promised sum assured to your beneficiaries. Hence, this ratio lays out the true picture of the claims of an insurance company for protecting your loved ones by providing them with the financial support that they will require at a time when they might need it more than anything.

We all have heard the advice that one must look into past records when considering the choice of mutual fund to invest in, and then opt for the fund that has proved to perform well in a consistent manner over the past years. Well, when we talk about a term insurance plan, the claim settlement ratio of the company indicates the same thing. Therefore, you should never ignore the claim settlement ratio of an insurance provider or settle for a lower ratio while opting for a plan. Always keep in mind, the higher the ratio of a company, the better it is for you and your dependents.

For most companies, you can find the claim settlement ratios on their official website. The regulatory body that is the Insurance Authority of UAE also issues an annual report for disclosing the claim settlement ratio of the various companies.

However, one thing that everyone should keep in mind that the number of claims that have been rejected by an insurance provider also includes the claims in which the company has refused to pay out the sum assured on the account of any fraud.

While the claim settlement ratio of a company is an extremely important factor to consider while purchasing a term insurance plan, it is not the only factor that should be taken into consideration while making this purchase. You should also consider having a look at the exclusion clause of the company – this is a list explicitly stating the various situations that the company does not cover. For instance, an insurance company may or may not refuse to provide coverage against a death caused by an adventure activity. More than often, such details of the policy are mentioned in the boring and long fine print, which can also be tough to read.

 However, it is worthwhile to spend your energy and time and go through all the details of the policy in order to completely understand and compare the various different scenarios under which your claim is likely to be rejected by the insurance company. Needless to put it out there, you should opt for a term insurance plan that puts the least exclusion covenants.

When you are doing this task of going through the features and fine print of your insurance policy, you should make it a point to understand the riders or the benefits that are offered in case the insured individual faces any permanent disability. We all know a term insurance plan is meant to provide protection against the financial risk that will occur if the breadwinner of the family is no longer around, but what if the breadwinner is alive but is not capable permanently to earn income?

Last but not least the cost of the policy also matters. You should compare the premium charged across the various policies. Thanks to the internet, our life has become so much more comfortable – the benefits along with the premium charges of a policy can now easily be explored just by clicking a button.

Once you have come to the decision of opting for a term insurance plan, you should consider choosing an online platform. The online platforms make the purchase super simple, easy, and also cost-effective. The cost of the agent is saved on the company’s end, and that part is passed on to the consumer in the form of lower premium payments. You should also compare both the online and the offline charges of buying a term insurance plan to see which option is helping you save more.

Of course, you need to show some caution while the buying process. You must make sure to provide all the details correctly about any existing medical conditions that you may have, about your lifestyle, among other things. For instance, if you think of hiding a habit of yours such as smoking from the insurance provider in your application form, it may save you some bit of premium charges but it can put the financial future of your dependents at great risk if the need ever arises.

Remember, a high claim settlement ratio will not help your cause if the disclosures that you have made are later found to be incomplete or even worse incorrect. Paying a slightly higher premium is much better than exposing your loved ones to the risk of a claim being rejected.