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Is a Good Claim Settlement Ratio Enough to Judge a Term Insurance Plan?

dateKnowledge Centre Team dateJanuary 13, 2021 views124 Views
Is a Good Claim Settlement Ratio Enough to Judge a Term Insurance Plan?

Buying term life insurance is not only an important financial decision, it is also one which stays with you for a long time. Since, you cannot make amends to your choice later, or go through the process regularly, you need to put your best foot forward.

Thus, the plan you choose must be at least takes care of your needs and has a good track record of fulfilling promises. Claim settlement ratio is a good indicator of the past performance of the insurer. However, this ratio alone may not be enough to give out everything about the insurer’s performance.

What is Claim Settlement Ratio?

Claim settlement ratio is the ratio of total claims received or pending in a financial year and total claims resolved.

For example, a life insurer receives 9980 new death claims in a financial year. The insurer has a balance of 20 death claims from the previous financial year.

Thus, the life insurer needs to resolve 10,000 claims in this financial year. If the insurer resolves 9000 claims out of the total, the claim settlement ratio for the insurer will be 90%.

Obviously, you want the ratio to be higher for a better insurer. The best life insurers in India usually have a claim settlement ratio of above 95%.

How Many Days to Settle The Claim?

The claim settlement ratio can also tell you the average time the insurer takes to settle the claim. For example, if the ratio for an insurer is 95% the insurer takes about 18 days (average time) to settle the claim.

However, the average time leaves a lot of questions. Like, what is the highest and lowest time? And, when does insurer process claims faster?

Maximum Time to Settle the Claim

The insurance regulator in India IRDA has defined the maximum time an insurer can take to settle a death claim. The regulator says that once all the documents have been submitted, the insurer must settle the claim within 30 days.

This limit includes the time it takes for the insurer to clarify and verify the details.

One Day Claim Settlement

This is important information because an insurer which can process the claim faster will offer better support to your family. The best insurers nowadays have the facility of one-day claim settlement for eligible policies.

For instance, Canara HSBC Oriental Bank of Commerce Life Insurance has the InstaPromise program for fast claim settlements. Under this program, the insurer can settle the eligible death claim within one working day.

The eligibility conditions are simple:

  • The policy must have completed at least three years before the claim
  • All the due premiums until the claim have been paid
  • The payable benefit amount should be up to Rs. 1 crore

Even for the policies which do not fall into this criteria the maximum claim settlement time could be no more than five working days. Especially when it is an online term insurance policy.

The Claim Settlement Experience

While fast claim settlement is a comforting update, the experience and support your family receives in this time will also mean a lot. The claim experience is a rare occasion in life, which is also filled with a lot of emotions due to the recent death of a loved one. This means the family will need a lot of support and handholding to navigate the claim process.

The best life insurers have already identified this problem and assign claim settlement officers to assist your dependents. These officers have a single objective of ensuring proper documentation, and faster settlement of the claim.

Thus, with the best life insurers, your dependents will have an easier time navigating the life insurance maze.

Persistency Ratio as an Indicator

A consumer survey report in 2015 points to the fact that about 50% of the consumers forget that they have bought a life insurance policy. The result is that their life cover lapses within a year of the purchase and about 70% policyholders will stop paying the premiums within 5 years of purchase.

Persistency ratio for an insurer shows exactly how long the customers are staying with the insurer. A higher persistency ratio will mean that the insurer is prompt in keeping their customers alert and policies in force.

Thus, you can relax about continuing your life cover while you are busy with your life and profession.

Policy Features as Decision Factors

While the performance of the life insurer is an important factor to consider while buying term life cover, the instrument should too. Few important policy features you should look for in the preferred term life policies are as follows:

Regular Income Pay Out Option

Your family will need a regular income to support their living expenses and a lump sum amount to pay off debt and save for future goals. If your term cover only pays them a lump sum amount, they will find it difficult to allocate money for regular income out of this.

However, if the term plan itself pays the benefit out to the family as a monthly income, they can simply use the lump sum money for investment. This option makes their life easier after the claim and protects them from any adverse financial decisions.

Critical Health Cover

Death of breadwinner is one of many events a family would need financial support in. Even in case of a dire disease, which usually has costly treatment and unpredictable nature, you will need financial support.

Thus, a term cover with this added benefit would be a better choice for you. iSelect Star term plan from Canara HSBC Oriental Bank of Commerce Life Insurance offers critical cover as an inbuilt benefit. So, when you buy iSelect Star Term Plan you automatically get the critical health cover.

Disability Cover

Disability is another hazard which can affect your capacity to earn money. Thus, you should have this additional cover available under the term insurance plan. The iSelect Star term plan gives you two options for disability cover:

  • The option of waiver of premium upon disability
  • A sum assured benefit payable on contracting disability

You can avail any one or both these benefits under the plan for a nominal increase in your annual premiums.

Choose your term life insurance carefully with these aspects in mind, and ensure long-term financial safety for your family.

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Frequently Asked Questions (FAQs) for Term Insurance

This being a term plan doesn't offer any payout after maturity or expiration date.

Each insurance company has its own term insurance premium calculator. If you want to check out the premium quote, go for the iSelect Star term plan calculator. It gives a premium amount based on your age, gender, habits, education, and annual income.

You can purchase an iSelect Star term plan anytime between 18 to 70 years of age.

It depends on your needs. For example, if you want to cover a child's education or wedding expenses, you have to include them in your coverage. Your premium will be calculated accordingly.

If your key purpose is to give your Family financial protection, go for the term insurance plan. And if you want some savings, in the end, go for a traditional life insurance plan.

Go for at least 12 times cover than your annual income. Or you can go as far as 20 times coverage as per your needs.

The right time is when you don't have anything to keep your Family safe from financial storms, and they rely on you for financial needs.

If you are unable to make the payment or suffering from a terminal illness, a term plan pays a part of the sum insured to treat your disease.

Term insurance riders are attachment or endorsements made, while taking the term insurance policy, as a supplementary coverage to policyholders. Apart from the core death benefit, term insurance riders offer below-given additional benefits:

  • Accidental Death Rider When a person suffers from a terminal illness, his/her family ends up spending a significant amount in treatment and medical expenses. Accelerated death rider pays a part of the sum insured in advance to cover such costs and save the family from running out of cash.
  • Accidental Disability Rider If the policyholder can't pay the premium because of an accident or permanent disability, a sudden disability this pays the premium on behalf of the policyholder till completion of policy term or for a defined duration.
  • Critical Illness Rider If the insured person gets a heart attack, cancer, or any other critical illness, this rider pays a lump sum on valid diagnosis.
  • Premium Waiver Rider If the policyholder is unable to make payments due to income loss or disability, a premium waiver rider waives off all future premium payments. And the term policy remains active until the expiration date.
  • Income Rider: The rider ensures that your family receives regular income + sum insured in case of unfortunate demise of life insured.

Anyone can go for life insurance as it offers some savings after the maturity date, but it doesn't cover the protection of your family . The best term insurance plan is solely designed for taking care of loved ones if something happens to you. Term plans act as a shield between your family and sudden financial fall. They make sure that your family lives a healthy life even after you. With a little amount paid per year, you can be worry-free from the family's financial conditions.

Questions that you need to ask while buying Term Insurance?

  1. 1. Amount of premium you have to pay based on your age, habits, education, and monthly income
  2. 2. The total number of benefits covered in the term plan. Do they include benefits that you care about the most?
  3. 3. How to save money on tax if you pay for the term plan?
  4. 4. Do they offer regular income options?
  5. 5. Can you change the coverage and premium in the future?
  6. 6. Does the claim consider valid if death occurs outside India?
  7. 7. Which kind of death is not covered by insurance?
  8. 8. Can NRIs take term insurance? If yes, what are the conditions?
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