Generally life insurance policies are brought based on the premium outgo and expected return associated with the policy, to assist dependents in meeting their critical financial needs when you are not around.
But, does it mean that the policy will be taking care financial needs of your dependent as insurer promises to do after policy holder’s death?
By assessing claim settlement record of the insurer, you can be less assured about your dependent’s future. Life insurance is to be considered as a life protection tool instead of an investment.
Claim settlement ratio will indicate the portion of claims that has been honored out of the total claims that are outstanding. Higher claim settlement ratio indicates that the insurance company is making payments to settle a claim.
As per the IRDA’s latest annual report 2012-2013, LIC leads with a high claim settlement ratio of 97.7% followed by ICICI prudential with 96.3% and HDFC life with 95.8%. Out of 23 private life insurers only 5 insurers have claim settlement ratio of more than 90%. Many private insurance companies have low claim settlement ratio in comparison to LIC, ICICI and HDFC.
LIC’s 97.7% claim settlement ratio mean that on an average only 2.3% claims are getting rejected.
Private insurance companies like Aegon Religare, Shriram Life and DLF Pamerica has low settlement ratio. It seems like new companies have poor claim settlement ratio in comparison to older and bigger companies.
For this reason, selecting a life insurance policy with low premium may not help your family in the long run. We suggest you to do your own home work before buying insurance policy or selecting your insurer.
Most of the time, claim gets rejected due to wrong information provided by policy holders in the proposal form. To make sure that your dependents are fully insured, you need to furnish accurate information and documents while buying life insurance and do all paper works to easy the process of claim settlement.
To know claim settlement ratio of insurer, you can visit IRDA site and go through industry data to ensure that your selected insurer has high claim settlement record.