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Tata Capital > Blog > Wealth Services > Understanding Claim Settlement Ratio in Term Insurance

Wealth Services

Understanding Claim Settlement Ratio in Term Insurance

Understanding Claim Settlement Ratio in Term Insurance

For any individual, their family's financial well-being and security comes first. Term insurance is one of the ways people can secure the financial future of dependent family members in the unfortunate event of their death.

However, when choosing the right term insurance for yourself or your family, you might consider the premium amount under the policy. After all, a high premium will help you get the best value on the policy. Another factor in choosing the right insurer is the claim settlement ratio that reflects on the insurer's claim resolution history.

Let's understand the meaning and importance of claim settlement ratio in term insurance.

What is the claim settlement ratio?

For an insurance company, the claim settlement ratio or CSR is the ratio of number of claims paid by the insurance company against the total number of claims filed in a year. For instance, if the company receives 100 claims in a year and successfully settles 85 of those, the CSR will be 85%.

The term insurance claim settlement ratio is one of the most important factors to consider while purchasing insurance. It helps you determine if the company is known to settle insurance claims without any hassles.

The higher the CSR, the better. A high CSR implies that the insurance company is more likely to settle your insurance claim and pay out the sum to the insured family.

Every year, the Insurance Regulatory and Development Authority of India releases data about the claim settlement ratio of various insurance companies in the country. When buying insurance, you must check this information to choose the right insurer.

How to calculate the claim settlement ratio?

The formula for calculating the term insurance claim settlement ratio is as follows-

CSR = (Number of claims settled/Total number of claims in a year) x 100

For example, if the company receives 1000 claims in a year and settles 900 of them, the CSR will be,

(900/1000) x 100 = 90%.

Importance of the claim settlement ratio

Here's why claim settlement ratio is critical during insurance purchase-

1. To determine the insurance provider's credibility

Term insurance is one of the most important investments you will make since it allows your family to fulfil their financial needs in your absence. As a result, you must consider CSR to understand the insurer's credibility and ensure that you can trust them to fulfil the insurance claim.

2. To ensure a seamless claim settlement process

When choosing your insurance provider, you want to ensure they offer a convenient and easy claim settlement process. CSR can help you understand that. A high CSR indicates the company offers an easy and robust settlement process.

So, you can be assured that the nominee will not only go through an easy process but will receive the settlement quickly.

3. To protect your family's financial future

When it comes to insurance claim settlement, it is your responsibility to ensure that they get the funds they need. A good claim settlement ratio above 85% indicates the insurer's reliability. Choose an insurer with a high CSR to protect your family's future.

What is the claim settlement process?

The claim settlement process involves various steps as follows-

1. After the policyholder's demise, the nominee should report the claim to the insurance company either online or offline.

2. Once the claim is reported, the nominee must submit the necessary documents for approval.

3. Once the documents are verified, the claim will be settled or rejected. In the case of the latter, the company will cite the reasons. The claim settlement process should be fast and convenient.

In conclusion

The CSR is an excellent indicator of the insurance company's credibility and reliability in settling the claim processes. You must consider this factor when choosing your insurance provider to keep your family financially secure.

Compare and choose the best insurance policy for your family with professional guidance from experts at Tata Capital Wealth. Visit the website to know more about the services today.

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