How To Compare And Evaluate Term Insurance Plans?
With so many term insurance plans in the market offering different types of term insurance benefits, choosing the right one that aligns with your goals and budget can be challenging. Although term insurance is an affordable type of life insurance, choosing the right one will not only help reap maximum benefits for the future but also act as an essential part of present financial planning.
However, it is essential to compare and evaluate different term plans to find the one that best suits your needs and requirements. You can also use a term insurance premium calculator to quickly and easily calculate the premium amount you would need to pay for the term insurance policy of your preference.
Through this article, we shall look into the critical factors while comparing and evaluating the term plan to make the best decision while buying one. These factors are the crucial nuances that the majority of policy buyers are unaware of.
What is the Different Parameter for Term Insurance Comparison While Choosing a Term Plan?
- Claim Settlement Ratio
CSR is an important metric when considering evaluating and comparing your term insurance plans. CSR ratio is readily available on each insurance company’s website as a unique selling point. It measures the percentage of claims the insurance company settles in the provided year.
CSR indicates the efficiency of the insurance company while settling claims. The higher the claim settlement ratio, the better it is for policyholders. Generally, a claim settlement ratio over 80% is considered good.
- Claim Repudiated Ratio
Claim Repudiated Ratio is also a ratio you can find on the IRDA website, which indicates the percentage of claims that insurance companies reject due to violation or false representation. A higher repudiated ratio indicates that the insurance company has adopted a rigorous attitude while enforcing their policy terms and leading to denying the genuine claim.
- Claim Rejection Ratio and pending ratio
These are another two essential ratios you shall find on the IRDA website. The claim rejection ratio indicates the percentage of claims the insurance company denies due to any violation, such as insufficiency in documents, false information or any delay in the filing. A high ratio of rejected claims can indicate a lack of capability in the claim processing system and a need for more transparency in communicating the claim requirement.
The claim pending ratio, on the other hand, shows the unsettled number of claims during the financial year; a higher ratio may suggest that the insurer’s claims settlement process could be faster or more efficient.
A top insurance company like Tata AIA offers Tata AIA term plans that highlight a 4-hour claim settlement as their unique selling point, giving them an edge over and above their competitors.
- Check the breakup of pending-claims
The breakup of claims pending (duration-wise) delivers information on the duration for which the claims have been pending. This helps to pinpoint bottlenecks in the claims processing system and indicates the prioritisation the insurance company gives to settle long-pending claims. This information is also available on the IRDA website.
- Solvency Ratio
It is very important to check the insurance company’s solvency, i.e., their financial capability to settle a claim. It is an essential requirement by IRDA that every insurance company needs to maintain a solvency ratio of at least 1.5.
This is because, in case of any natural disaster or other misfortunate events, the insurance company may receive a high volume of claims that need prioritisation for settlement. So, it’s important to consider the solvency ratio when choosing an insurer to avoid compromising your family’s financial future, more so while buying a term insurance policy.
- Other Important Factors
It is also essential to check the number of riders that are offered, as they help in extending the policy coverage of a term plan.
Conclusion
When comparing your term insurance plan, it is essential to review all the above indicators and select the plan that aligns with your goals. Also, remember to set standing instructions for auto-debiting your premiums so you don’t miss out on paying any of the premiums, even if you forget.
