Buying a life insurance policy? Here’s how to choose the right insurer

Published: July 9, 2018 1:27:44 PM

Life insurance is the most secure way to provide safety to your loved ones. However, choosing the right insurer is not an easy job.

life insurance, life insurance plans, life insurance companies in india, how to choose the right insurer, Early claims, lapse ratioThere are many life insurance companies in India and to pick the best one out of all is pretty much difficult.

Life insurance is the most secure way to provide safety to your loved ones, get returns and achieve financial goals. There are various types of life insurance plans that serve different needs of customers. Still, a huge number of Indians are grossly underinsured now. This despite the fact that there are multiple benefits that an effective life insurance plan offers. Such a plan can help you beat several unwanted emergencies effectively and keep you and your family secured. A life insurance plan will not only provide the needful safety cover, but will also allow you to get good returns (in some cases) that will assist in achieving your financial goals in the long run.

Nowadays, however, there are many life insurance companies in India and to pick the best one out of all is pretty much difficult. The first thing that people should look for is the timely claim settlement. As per the IRDAI, insurance companies have to settle the non-early claims within 15 days and early claims within 90 days. Non-early claims settlement is based on the receipt of the death certificate and a simple claim form. Claims which arise just because of the insured’s death within three years of taking the policies are known as early claims.

Let’s explore the same further:

Early claims

It is obvious that a few investigations are required before the settlement of early claims. It requires more time. What is the proportion of early claims in the life insurance industry of India? Although there is no such statistics available, it will be quite ok to say that it hardly exceeds 20 per cent, otherwise, it will difficult for insurance companies to maintain the solvency. Therefore, more than 80% claims must be settled within 15 days. Sometimes, insurance companies take a long time in investigating claims.

While comparing life insurance policies of different companies, you must keep the average sum assured payout in your mind. Most of the insurance companies’ payouts are pretty much less. For a few insurance companies, it would be around one third or even one-fifth of the average sum assured under a policy. There can be two reasons behind this. The first one is that a few policies result in general death claims which do not carry high sum assured. Second is that most of the high sum assured claims related to the early claims are partly/fully repudiated. While there are no statistics to be sure about the actual reason, it is suggested to examine the claim settlement records of insurers from friends and associates before taking high insurance cover.

Lapse ratio

Another way to measure the popularity of the insurance companies is to check their lapse ratio. Lapses including forfeitures during a year/ Arithmetic Mean of the business in force at the beginning and at the end of a year are expressed in percentage terms. So, Lapse Ratio not only helps you in understanding the new trend of insurance companies like which life insurance is high in demand, but also assist you in choosing the right insurance company on which you can trust. The lower the ratio, the higher is the acceptance level of the insurance company. A high lapse ratio refers to the misspelling of insurance policies or poor servicing and claims settlement records.

(By Naval Goel, CEO & Founder of

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