How Is Claim Settlement Ratio Important While Purchasing A Life Insurance?
Published On Aug 13, 2021
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If the life assured passes away, a life insurance policy ensures the financial security of his/her family. Therefore, choosing the ideal life insurance coverage to match your needs at a reasonable cost is crucial. Furthermore, to avoid any problems in the event of an unexpected event, it is vital to pick a reputable insurance provider for the policy contract. When comparing different insurance plans, some factors like the policy duration, life coverage, premium prices etc., could be considered. Moreover, the claim settlement ratio is an important indicator that reveals the insurance provider's reputation. The following article elaborates on the importance of a claim settlement ratio while purchasing a life insurance plan, so continue reading to learn about it.
What is a Claim Settlement Ratio?
The percentage of claims that an insurance company settles is known as the claim settlement ratio (CSR). A higher proportion is preferred since it displays the insurer's dependability and plausibility. The claim settlement ratio can be calculated by dividing the number of resolved insurance claims by the number of claims filed with the insurance provider.
How is Claim Settlement Ratio Important While Purchasing Life Insurance?
The primary goal of a life insurance policy is to give death benefits to the family of the deceased life assured. If the insurer has a low credit rating, it demonstrates a lack of commitment to the contract and negates the entire point of the contract policy. If the family's claim is denied and the deceased's life assured was the family's sole breadwinner, the situation worsens. In this scenario, the coverage was their sole option for getting out of debt. Hence, while obtaining insurance from a firm, it's a good idea to look at their claim settlement ratio. As previously stated, a greater settlement ratio demonstrates the insurer's trustworthiness. So, if the company's percentage is greater than 95%, they would have paid 95 out of 100 claims.
How Consistent Should the Claim Settlement Ratio Be?
The stability of the insurance provider's claim settlement ratio is essential since the range better indicates the company's claim rejection record. Hence, it's a good idea to look at the company's claim settlement ratio over the last five years. Furthermore, a smaller range indicates that the organisation is dependable. A range of 91-95 per cent, for example, is preferable to 86-93 per cent.
As previously stated, the claim settlement ratio is an essential factor in picking your insurer. However, it should not be the only reason determining your decision; other factors such as the sum assured, additional benefits, and so on should also be considered. Moreover, in order to make a better and informed decision, you can also visit a financial expert or an insurance agent.
You may also like to read - 3 Crucial Mistakes To Avoid While Purchasing A Life Insurance Policy
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.