One way to extend a financial security blanket around your loved ones is by buying term insurance. It plays a significant role in securing your family’s future. However, choosing the right insurance company is a challenging decision.
It is about relying on a company with your hard-earned money. Although term insurance acts as a friend in need, it is still a contract between you and your insurer. So, the first step you should take before buying a term plan is to check the insurers’ claim settlement ratio (CSR).
What is CSR?
Claim Settlement Ratio defines the ratio of the number of claims settled by an insurer over the total claim intimations received in a financial year. It is an authentic ratio you can rely upon as all the registered insurance companies have to submit the claim reports to the Insurance Regulatory and Development Authority of India (IRDAI). The Authority then publishes a report in public, which you can check online.
As a rule of thumb, you must check the Claim Settlement Ratio of the insurer before buying a term plan. To get a better idea on the insurer’s performance, look out for the CSR reports from the IRDAI for the last couple of years. It will give you a better idea about an insurer’s commitment towards settling the claims without hassles. Also, most people recommend selecting an insurer that has a high Claim Settlement Ratio of above 95%.
Why Considering CSR is Important While Buying a Term Plan?
One of the main reasons why you invest money in a term plan is to ensure financial protection to your family when you will not be around. By making an informed decision to choose an insurer, you do your part to minimize hassles for the policy nominee during the claim settlement process. It is where you want to create a checklist of parameters to be considered while buying a term plan, the claim paid ratio being one of them.
By knowing about term insurance claim settlement ratio in detail, you also obtain insights about the causes of claim rejection, which can be avoided. There are many advantages to checking an insurer’s CSR while buying a term plan.
To Check Reliability of an Insurer
The reputation of a term insurance company increases over time because of the claim settlement experience it delivers. When one policyholder feels satisfied with the claim process of an insurer, he is most likely to recommend the policy to the peers. It will bring in more people to buy the policy as the value of term plan recommendations is much higher than knowing about it online or offline.
A high claim settlement ratio also tells you about the experience of existing policyholders and the pre-built trust factor. By comparing the claim paid ratio, you can check which insurer would be more trustworthy.
To Ensure Financial Protection to Your Family
Financial troubles that arise with the unfortunate death of a breadwinner create much trouble for the family. The expenses related to household needs, child’s education or regular medication of the elderly do not end afterwards. The problems grow even more when there are EMIs of various loans left unpaid alongside.
You can prevent your family members from facing such troubles by making an informed decision to buy a term plan. Think of CSR as an assurance of seamless term plan buying experience as well as the ease of getting the claim settled. The policy nominee will get the sum assured after you as per the inclusion terms.
What Else Should You Look for While Buying a Term Plan?
There are several criteria that you, as a policy buyer, should consider before opting for a term plan. Checking the term insurance claim settlement ratio is one of them. However, you must not neglect other factors. Note that, the policy you select must fit well into your financial goals. In fact, the process of buying a term plan should begin by analyzing your needs and the level of protection you want to offer to your loved ones.
Then think of your annual income and age. The sum assured under a term plan must be around ten times the total income you earn in a year. Once you have decided on these terms, look at other features you can add to your term plan. Term insurance plans, nowadays, offer various riders like Critical Illness Benefit and Waiver of Premium that you can select over the base policy.
Every individual’s needs are unique and keep on changing as well as per different life stages. Thus, it is imperative to choose a term policy that can adequately compensate for the income loss if something happens to you. Also, make sure you plan about paying the term plan EMIs on time.