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How to choose the right life insurance provider to protect your family?
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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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A life insurance plan can protect your loved ones from the worst financial repercussions in case of a tragedy. As the primary (or perhaps even the sole) earning member in your family, it’s possible that you’ve been considering buying a life cover for some time now. In case you haven’t already checked this box in your financial plan, it’s better to do it sooner rather than later.
However, while you’re out there shopping for a life cover online or offline, it’s just as important to choose the right life insurance policy as it is to select the right insurance provider. Many people give a lot of attention to the former, but make the mistake of overlooking the latter.
But you can steer clear of this pitfall by following the tips outlined below and choosing a life insurance company that will stand by your family in uncertain times.
5 tips to help you choose the right life insurance provider to protect your family
Here’s what you can do to ensure that the life cover provider you opt for is genuine and will honor your claims diligently.
1. Check the claim settlement ratio
The claim settlement ratio tells you the percentage of claims received that the insurance provider actually settles. It is computed as the ratio of the claims settled to the claims received. For example, a claim settlement ratio of 96% indicates that the insurer has settled 96 out of every 100 claims received.
The higher the claim settlement ratio, the better it is because it indicates that the insurer settles a large part of the claims received. This will effectively make it easier for your family to have their genuine claims taken care of promptly.
2. Look at the solvency ratio
The solvency ratio is another important metric to consider when you are looking for a good life insurance provider. It is a measure of the company’s ability to meet its long-term debt and other liabilities. The Insurance Regulatory and Development Authority of India (IRDAI) mandates that insurance companies must maintain a minimum solvency ratio of 1.5.
Naturally, the higher the solvency ratio is, the better. This is because a high solvency ratio indicates that the insurer is financially strong. This, in turn, is an indicator that the insurance provider is capable of paying out the genuine claims raised against their policies.
3. Compare the incurred claims ratio
While the claim settlement ratio and the solvency ratio are often considered, the incurred claims ratio is easy to overlook. This metric is the ratio of the net claims settled by an insurance company to the net premiums collected in a given financial year. A higher incurred claims ratio is a good thing, since it means the company settles a lot of claims.
On the other hand, a lower incurred claims ratio may be an indicator that the company is not financially sound, since it doesn’t settle as many claims despite collecting a healthy amount of premiums.
4. Do a cost-benefit analysis
Apart from the ratios outlined above, it is essential to perform a cost-benefit analysis to ensure that you are getting your money’s worth. Directly opting for the insurance provider who offers the lowest premium rates may seem like the easy option, but it may not always be the smartest thing to do.
Instead, you need to compare the costs charged as well as the benefits offered by different life insurance providers. This way, you can choose the insurance company that gives you the most value for your money.
5. Read what other customers are saying
Above all, you need to choose a life insurance company that offers reliable and comprehensive customer support. To find the companies that fit this criteria, you can check out what other customers are saying about different life insurance providers. Read reviews of genuine customers online and look up different forums to identify any sore spots in the customer support services offered by the life insurance providers on your list.
Conclusion
Keeping these factors in mind should help you narrow down your choices and find a life insurance provider you can trust. It is important to do this, so your family will have a trusted financial safety net to support them in case something untoward happens to you. So, ensure that you look at the metrics outlined above and do your due diligence before buying a life insurance policy.
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