If you are looking for a life insurance plan to secure the future of your family, you need to understand the claim settlement ratio. A claim settlement ratio is an important indicator of an insurance company’s performance in the settlement of claims. Here is all you need to know about a claim and important factors to consider before buying a plan.
Understanding a claim
If the insured individual dies due to an unfortunate event and the family informs the insurance company about the incident, the insurer will start investigating its details before making a payment. This intimation is a claim that is raised by the insurer for the payment of the insured amount. The insurance company will check the rules of the policy before making a payment.
Situations in which a claim can occur
A claim can occur in two situations:
If the insurer loses his life, the nominees will get financial assistance in the form of a lump sum from the company. This is also a big reason why you need to check the life insurance claim settlement ratio before buying a policy.
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The second reason is a maturity claim, which is made at the end of the term plan. If you survive the policy term, you receive a maturity benefit.
Understanding a claim settlement ratio
If you want to know how to choose a life insurance company, you need to start by understanding the claim settlement ratio. This ratio is the total claims settled by the company as against the number of claims received in a particular year.
How to calculate CSR
Assume that a company has received 1000 claims during a year and has settled 900 claims. Then, CSR = (900/1000) *100, which is 90%. Higher the claim ratio of life insurance companies, better it is.
Impact of CSR in choosing an insurance company
CSR will help you understand the credibility of an insurance company. There are some companies, which refuse to pay the sum to the insured individual and this occurs when the company finds out that the individual was attempting to cheat. It also happens when there is a dispute concerning the nominee of the insured. If you notice that the CSR is very low as compared to the industry standards, you need to avoid the company. This means the company is refusing to pay claims due to numerous reasons. If the insurer has genuine reasons behind not paying a claim, it is understandable. However, the insurance company should not be trusted if it is not paying the authentic claims. Claim settlement ratio comparison will give a clear insight into the performance of the company. Companies, which settle claims within one month of applying, are considered to be reliable.
Limitations of CSR
CSR is a percentage and not a figure. In the case of early days of a plan, CSR will not show the right performance of the company. It is a strong indicator in the later years. CSR changes each year and it will not be constant throughout the policy term.
Whenever you think of buying life insurance online, you need to understand what the company’s claim settlement ratio is. Analyze and understand its implications to make the right decision.