How Term Insurance Claim Settlement Ratio Matters

What Is Term Insurance?

Term insurance is a purely protective life cover that provides financial protection to the policyholder. It is an important financial planning tool that may ensure your family’s life goals are achievable even in your absence. This is because under a term insurance policy, the insurer offers a lump sum payment to your nominee if you are no more. This financial pay-out can help your family members achieve life goals such as paying for the higher education of your kids or getting your children married.

In return for the life cover obtained when you buy term insurance, you will be required to pay a premium to the insurer at periodic intervals. These premiums can be paid as a lump sum amount when you buy term insurance, or they can be paid periodically on a monthly, quarterly, semi-annual, or annual basis, depending on the kind of plan you choose.

You can make use of a term insurance calculator to figure out the amount of sum assured needed for your family to get through the loss of their primary or only source of income. A term insurance calculator is easy to use, and you can access it free of charge online. Before you purchase a term plan from an insurer, it is advisable to look at their claim settlement ratio.

What Is the Claim Settlement Ratio of a Life Insurance Company?

In order to receive the money due to them in case of an exigency, your beneficiaries will need to raise a claim with the insurance company from whom you have purchased the term plan. The insurer then settles this claim by looking into the details of the claim application made by your beneficiaries and then paying out the sum assured in case the claim is genuine and policy is in force.

This process forms the basis of the claim settlement ratio of an insurer. Simply put, the term insurance claim settlement ratio is the total number of claims approved by insurance company divided by the total number of claims received by them. This is an important factor you need to look into before you buy term insurance from an insurance provider.

What Does Claim Settlement Ratio Mean for Your Term Insurance Purchase?

The term insurance claim settlement ratio of an insurer is one of the many factors that need to be weighed in before making a purchase. An insurer with a higher term insurance claim settlement ratio may be a better choice to purchase your term plan from, since the likelihood of them paying out the sum assured to your family is higher. In other words, it is always a good idea to buy term insurance from an insurer with a high term insurance claim settlement ratio.

Claim Settlement Process

The claim settlement process of a death claim under a term insurance plan is as follows –

1. After the life insured passes away, the nominee or any other claimant should inform the insurance company of the same. This is called reporting the claim.
2. To inform the insurance company, the claimant should fill out and submit the claim form. The form is usually available on the insurer’s website and also at the branch office.
3. The claim form should be attached with a set of relevant documents.
4. Once the form is submitted, the insurance company reviews the claims and verifies the documents. If any document is missing, the insurer sends a notice to submit the missing document within the specified time.
5. Once the documents are verified, the claim is settled or rejected. In the case of claim rejection, the insurance company cites the reason for rejection.
6. In the case of the return of premium term insurance plans, the insurance company usually sends a discharge voucher before the maturity date. You have to fill out the voucher and send it to the insurer for a refund of the premium on maturity.

Documents Required for Claim Settlement in Term Insurance

Some of the documents required for death claims are as follows –

1. The original policy document
2. Attested copy of the death certificate issued by the local authorities
3. The claim form, filled and signed
4. An NEFT Mandate form is signed by bank authorities for direct transfer of death claim. Else, the claimant can also submit a copy of the cancelled cheque or bank passbook
5. A photo identity and address proof of the nominee is also required like the Aadhaar Card, passport, voter’s ID card, etc.

In the case of medical or natural death, the following additional documents would be required –

1. Copy of the medical records of the insured like the discharge summary, admission notes, etc.
2. Statement from the attending physician in the form issued by the insurance company
3. Employer’s certificate, if applicable

In the case of accidental deaths, the following additional documents would be required–

1. Police FIR, panchnama or police complaint
2. Post mortem report
3. Final police investigation report, if any

Please note, the list of documents required may differ from insurer to insurer. Please check with your insurer for more details.

How Is the Term Insurance Claim Settlement Ratio Calculated?

The Claim Settlement Ratio or CSR shows the number of claims an insurer settles compared to the total received in a year. This is a measure that can help you judge the reliability of the insurer. Here is a formula used for CSR:

Claim Settlement Ratio = (Total claims settled / Total claims received) × 100

Let us take an example to know it better. Suppose an insurer receives 1000 claims in a year, settles 950, rejects 40, and has 10 pending. Now the CSR would be:

950 ÷ 1000 × 100 = 95%

This shows that the insurer has settled 95% of the claims. Having a high CSR is a good sign, but also consider policy benefits and customer service before finalizing a plan.

What Is the Importance of Term Insurance Claim Settlement Ratio?

The term insurance claim settlement ratio (CSR) is a key indicator of an insurance company’s reliability. Here is why it is important:

1. Reflects Insurer’s Trustworthiness

   
   

   Having a good claim settlement ratio helps build trust around the insurer. A high CSR means the insurer can efficiently handle claims and support policyholders during difficult times.

   
   

2. Offers Financial Security for Nominees

   
   

   In case a life assured passes away, the nominee depends on the claim payout for financial stability. If the insurer offers a high CSR, it is said to be more dependable and vice-versa. Having a high CSR ensures the nominee gets the promised support on time.

   
   

3. Helps in Making Informed Choices

   
   

   Comparing CSRs of different insurers can help you pick a trustworthy company. However, it’s important to consider other factors like policy terms and customer service too.

   
   

How to Choose the Right Insurance Company in India?

Choosing the right insurance company is important to make sure your family gets the support they need when it matters most. Here’s what to look for:

1. Check the claim settlement ratio

   
   

   This tells you how many claims the company pays out. A good settlement ratio means they’re dependable and settle most claims without issues.

   
   

2. See how good their customer support is

   
   

   You will want a company that answers your questions quickly and guides you during the claim process without making things difficult.

   
   

3. Look for helpful rider options

   
   

   Some insurers offer extras optional riders along with base plan like critical illness or accidental death cover. These riders add more protection to your basic plan, on payment of nominal additional premium.

   
   

4. Read real user reviews

   
   

   Always check for user reviews and feedback from those who have purchased a policy from the insurer you are considering. This way, you can get an idea of what to expect.

   
   

Reasons Why Our Claims Settlement Process is Seamless

1. Fast and Hassle-Free Processing

   
   

   We know that dealing with claims can be stressful, especially during tough times. That’s why our team ensures a smooth and speedy process. You can submit documents online, and our claim experts will guide you at every step to ensure your claim is settled quickly without unnecessary delays.

   
   

2. Transparent Communication

   
   

   We keep things clear and simple. From the moment you file your claim, you will receive regular updates. We also share a list of required documents and steps upfront, so there are no surprises or confusion later on.

   
   

3. Supportive Claim Assistance

   
   

   You’re not alone during the claims process. Our dedicated claim experts offer personal support and walk you through the entire process. Whether you're a senior citizen or filing from a remote area, we make sure you’re fully supported.

   
   

4. High Claim Settlement Ratio

   
   

   We have a strong history of honoring genuine claims. Our high claim settlement ratio reflects our commitment to helping families in need. We prioritize timely support.

   
   

Common Reasons Why Term Insurance Claims Might Get Rejected

It is highly unlikely that an insurer will have a 100% claim settlement ratio. This is because there are many reasons why a term insurance claim might be rejected. Here is a closer look at some of these reasons.

1. Policy lapse

   
   

   If you have failed to pay your premiums on time, your policy could lapse, rendering it ineffective. Most term plans allow for a grace period in case you have forgotten to pay the premium due, and if you fail to make the payment within that period, the policy lapses. A claim made on a lapsed policy will be denied.

   
   

   How to avoid this? The simplest way to avoid this is to pay your premiums on time. This ensures that your family will have a smoother claim settlement process.

   
   

2. Incorrect or incomplete disclosure

   
   

   As per Section 45 of the Insurance Act, 1948, Life insurance Policy can be called in question within three (3) years on the ground that any statement of or suppression of a fact material to expectancy of life of the Life Assured or Policyholder was incorrectly made in the Proposal Form or other documents, basis which Policy was issued or revived or Rider issued. Accordingly, if you fail to provide accurate information in the proposal form, or provide incorrect information, hide certain important personal details, or give incomplete disclosure of facts, it can render claim on the policy to become unenforceable.

   
   

3. Missing Beneficiary or Nominee Information

   
   

   If the nominee details are missing or incomplete in the policy, it can lead to claim delays or even rejection. The insurer may not know who the rightful beneficiary is, making the claim difficult to process. Always ensure nominee information is correctly updated to avoid complications later.

   
   

4. Not Sharing Details About Current or Past Plans

   
   

   Hiding details of existing or past insurance policies is a common reason for claim rejection. Insurers use this information to assess overall risk. Non-disclosure may be seen as a breach of trust, and if found during claim verification, it can result in denial. Always disclose all policy details honestly.

   
   

5. Policy Expired Due to Missed Premium Payments

   
   

   If premiums are not paid on time, the policy can lapse. A lapsed policy means no coverage, and claims made after expiration are automatically rejected. Set reminders or opt for auto-debit to ensure timely premium payments and keep your coverage active.

   
   

How to avoid this?

Ensure that you provide all the required material details completely and accurately upfront, and in case of any doubts, get them resolved right away, so your insurance application is complete and there is no material non-disclosure. In addition, you can make sure to read the policy document thoroughly and get to know the details of the contestability period and the kinds of exigencies covered by your plan.

Conclusion

The claim settlement process is crucial to get your family through tough times. It is also important to have all the necessary documents in order, so your beneficiaries do not face any hassles when raising a claim with the insurer. Ultimately, the claim settlement ratio is an important factor to consider when you buy term insurance.

FAQs

1. What should one do to ensure a smooth claim settlement process for my term insurance plan?

   
   

   To ensure a smooth claim settlement, inform the insurance company of the death timely. Moreover, submit all the relevant documents with the claim form. If any document is missing, the insurance company will inform you of the same. Get the missing document and submit it as soon as possible for quick claim settlements.

   
   

2. Where can I get claim form required for claim submission?

   
   

   You can get the claim form by:

   
   
   • Downloading from the claims section on the insurer’s website
   • Visiting the nearest company branch
   • Contacting your Agent or insurance intermediary
   
   

3. What is Claim Settlement Ratio (CSR) in insurance?

   
   

   The Claim Settlement Ratio (CSR) is the percentage of claims an insurance company successfully settles out of the total claims received in a financial year. It’s calculated using the formula:

   
   

   CSR = (Total claims settled / Total claims received) × 100.

   
   

4. Why is CSR important in insurance?

   
   

   The metric CSR implies how trustworthy and efficient an insurance company is when it comes to settling claims. If it has a high ratio then it means most claims are being paid without hassles and vice-versa.

   
   

5. Why is the claim settlement ratio significant?

   
   

   It is significant because it helps you understand the reliability of the insurer. Having a high CSR means most claim applications are honored and you have less chance of facing any challenges.

   
   

6. What else should I consider besides CSR when buying term insurance?

   
   

   When getting a term insurance, you can look at some important factors like the premium cost, coverage amount, rider options (it covers critical illness or accidental death), claim settlement process, and finally the insurer reviews.