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Claim settlement ratio key to find right term insurance plan

Claim settlement ratio key to find right term insurance plan
Last Updated: Sep 27, 2016 | 7,063 Views
IRDAI’s death claim settlement ratio for the year 2014-15 is out and on the top is none other than state-run Life Insurance Corporation (LIC) of India. LIC has a claim settlement ratio of 98% which is higher than the industry average of 97%. This essentially means that LIC settles over 98% percent of the claims it gets. Max Life and Birla Sunlife are other companies with claim settlement ratios of 95-96%. On the other hand companies like DLF Pramerica and Edelweiss Tokio have abysmally low settlement ratio of 57%, this essentially means that there is a higher probability of your claim getting rejected if you buy insurance from DLF Pramerica or Edelweiss Tokio whereas the chances of your claim getting accepted is high when you buy insurance from LIC, Max Life or Birla Sunlife.
Life Insurer Total Claims (Units) Claims Paid (Units) Claims Paid (%)
AEGON RELIGARE 460 413 89.78%
AVIVA 1683 1398 83.07%
BAJAJ ALLIANZ 20661 18978 91.85%
BHARTI AXA 1110 898 80.90%
BIRLA SUNLIFE 8453 8056 95.30%
CANARA HSBC 576 516 89.58%
DLF PRAMERICA 953 545 57.19% **
EDELWEISS TOKIO 119 68 57.14%
FUTURE GENERALI 2160 1808 83.70%
HDFC STANDARD 12189 11031 90.50%
ICICI PRUDENTIAL 12309 11546 93.80%
IDBI FEDERAL 971 736 75.80%
INDIAFIRST 1655 1195 72.21%
EXIDE LIFE 3432 2955 86.10%
KOTAK MAHINDRA 2866 2437 90.73%
MAX LIFE 9149 8786 96.03%
 PNB METLIFE 2466 2290 92.86%
RELIANCE LIFE 18142 15211 83.84%
SAHARA 778 700 89.97%
SBI LIFE 14876 13303 89.43%
SHRIRAM LIFE 1960 1287 65.66%
STAR UNION DAI-ICHI 1266 1191 94.08%
TATA AIA 3873 3659 94.47%
PRIVATE TOTAL 121927 109007 89.40%
LIC 755901 742243 98.19% **
INDUSTRY TOTAL 877828 851250 96.97%

A term insurance plan is purely risk-protection and is meant to safeguard against the loss of income of the primary bread winner due to death. If you already have investments and seek only risk cover then an online term insurance policy is aptly suited for you. In a term plan there is no money back or maturity benefit only pure risk-coverage from death.

Buying a term insurance is an important decision as it is the last safety mechanism for you to insulate your family against the risk of income loss due to the death of the primary bread winner. While buying a term plan you have to be particularly sure that you buy a term plan from an insurance company that has high claim settlement ratio. Claims Settlement Ratio is defined as the ratio of claims paid to nominees by the insurance company against the total number of claims filed.

Which Term Plan to buy?

Always buy a term plan from a company that has high claim settlement ratio. The insurance sector regulator IRDA (Insurance Regulatory Development Authority of India) publishes a death claim settlement ratio report annually for life insurance companies operating in India. This report provides a good indicator of quantum of claims getting settled against total claims filed annually. 

How it Works?

A term plan promises a fixed amount of money or sum assured to the beneficiaries of the life assured, in-case of death of the life assured within the policy period. Policy term in a term insurance plan is the term for which the plan is valid. Online term insurance plans are most affordable of all the categories of insurance plans available. 

Know your premium

A non-smoking male aged 28 years will have to pay premium in the range of Rs. 7,400-9,000 for a term or policy period of 35 years or maturity at 70, whichever is early. The premium for a smoker in a similar scenario would be Rs 8256- 14,430 annually. Many insurance companies have the option to pay monthly or semi-annually.  Be sure to check the claim settlement ratio of the policy (closer to 100 percent is better) before buying a policy lest the risk of rejection increases.

It is also important to know what the adequate cover for your life is. Whether Rs 1 crore cover will truly compensate for the loss of your income to your family? Or should Rs. 50 lakh suffice you’re your wife alone if your children are more or less settled and you already have adequate savings. Will your family need money for any major life events such as life-events such as higher education of children in the family etc? It’s important to ask yourself these questions before selecting a cover because premium increases with sum assured.


It’s important to factor in the effect of inflation when you think of goals in calculating your cover. What is the tuition fees of your kid’s favourite college and what will it cost 10 years from now? Will your house need repairs in some years or renovation of furniture? These questions may also help you reach a realistic figure to seek insurance for. A simple Google search will give you throw up umpteen calculators at you to calculate the insurance amount and the premium thereof.

Timing makes all the difference 

The term or tenure of the plan is as important as the amount of cover or sum assured and premium thereof. According to experts, the minimum age that one should be insured is up till 65 years. This ensures that the person is covered throughout his entire working life.

Although 15-20 year covers are available at much lower premiums but it is advisable not to go for these as the term of the policy is insufficient. Insurance premiums zoom for those looking to buy insurance in their 40's, as the risk of death increases after that.

Other factors

Other than factors, it is essential to focus on these factors that insurance companies rely on to determine the premium of your term plans: Health history, current health, weight, occupation. For example the premium of a race car driver or test pilot is likely to be higher than an accountant.  

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