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Life insurance is indeed a matter of life and death. As an investor, you must place your trust in the hands of an insurance company to take care of your loved ones when you are gone. The insurer you choose should be reliable and stable enough that you can commit to them for a long-term and depend on them to hold their end of the bargain when the time comes. But how do you know which insurance provider is trustworthy enough? You get that information by checking their claim settlement ratio.


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Claim settlement ratio is defined as the number of claims processed and released by the insurer in a specific year. So, when you are checking the list of document required for a term plan, you must also check the company’s claim paid ratio to estimate their credibility and reputation in the market.

Why is claim settlement ratio so important?

Claim settlement ratio is essential to check because it helps you see how many cases have your insurance provider successfully cleared in a certain period. This number of reflected in percentage.

As a policyholder, you must only buy your insurance from an insurance provider who has a claim paid ratio of over 90%. This number is an objective benchmark that helps you determine which insurance provider is reliable. According to financial advisors, you must check the claim settlement record of an insurance company before you check their benefits and premium.

It would help if you only bought the term insurance plan from a trusted provider. Amongst so many insurers, many do not settle claims on time. Therefore, it is advised to avoid such companies by checking their claim settlement.

Apart from this, you can also check the following aspects of an insurance policy offered by an insurance provider before investing in a term insurance plan.

Shutterstock Image 2

Image Source: Shutterstock

1. Cost/Premium

Premiums of your policy will be affected by the coverage amount you choose for your plan. This is the amount that your loved ones will receive in the event of your passing during the policy period.  To know the exact amount of coverage you need, you must assess elements like your lifestyle, financial responsibilities, liabilities, as well as necessary expenses to come up with your family’s tentative future requirements. Ideally, the best way to get a cheaper insurance policy is by investing in it early. It keeps your premium low and allows you to take a prudent investment decision at a young age. It is generally advisable to choose a coverage amount that is at least 15-20 times your current income.

2. List of Benefits

With so many term plans available in the market, your best bet is to choose a plan that is practical and meets your requirements. When looking for term insurance, be sure to assess the policy benefits along with other aspects such as flexible payout options. You can use the online insurance calculator to compare policies with regards to payable premium and benefits to make an informed decision.

3. Add-ons

Add-ons, also known as riders, are additional benefits that can be attached to your policy at an additional price to expand the coverage of your policy. You can choose from various rider options such as waiver of premium, critical illness, and accidental death benefit, as per your need. With each rider, your policy premium will go up. Therefore, it is essential to evaluate your requirements before attaching riders to your insurance policy.

4. Suitable Payout Options

Another factor you must keep in mind when investing in a term insurance plan is the payout option. You should be able to choose between a lump sum payout or a payout with regular monthly income.

Now that you know everything there is to know about a term insurance plan, it is imperative to make the decision sooner and act quickly to purchase a suitable insurance plan. The more you wait, the higher is the risk for your loved ones to be left high and dry in case of your unfortunate demise. There are plenty of insurance options in the market. So, carefully evaluate your plans based on the points discussed in this article and make an informed choice.


Disclaimer: The contents of this article are for information purposes only and do not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof.

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June 2024