We are always looking
for cheaper options for things we need, and insurance is no exception. Such an
approach may, however, not be in your best interests all the time, says our
experts
The Indian psyche is
hardwired to try and get good deals. Hence, it comes as no surprise that we
want to buy insurance at the lowest rate possible all the time. Of course,
cheap life insurance can be purchased from most providers since there are many
ways to cut down a policy's price. However, if you are buying life insurance
with the sole intention of taking care of the needs of your family in
unforeseen circumstances, it is paramount to identify the right insurance
company as well as the right product.
Here are some of the
factors that you should consider before signing an insurance agreement:
Are the service levels
satisfactory?
This parameter can be
experienced only once you have purchased the policy. Hence, it makes sense to
check with friends and relatives who are already dealing with the company you
are considering instead of going by the element of low premium alone. There are
also certain other thumb rules – in case of a health insurance policy, it is
better to choose a company that handles claims itself rather than outsourcing
to a Third Party Administrator (TPA).
Who should you buy
from?
Agents generally sell
products of a single company. Hence, it may be a
better idea to approach a broker who deals with multiple companies, as dealing
with an agent will limit your choices. Also, as a buyer, it’s always a good idea to get the necessary
information from the broker, while simultaneously checking the details with
some online portals before taking the final decision.
Some of the other
aspects to consider are product simplicity, ease of paying the insurance
premium through offline and online channels, and the company’s history of
dealing with policies distanced by agents so that you are not adversely
affected in case your agent suddenly moves out of the picture. Ensure that the
agent/broker answers all your questions and read every word of the policy before
signing on the insurance agreement. Integrity and honesty of the intermediary
is an important factor while making a decision.
Are grievances
addressed adequately?
The experiences of
friends and colleagues who hold policies in the same company are helpful in
understanding whether the company you are considering has an effective
grievance redressal mechanism
What is the claims
settlement ratio?
The claims settlement
ratio, although an important parameter, cannot be the sole criterion to choose
an insurance company. Every year, the report released by the Insurance
Regulatory and Development Authority (IRDA) lists the claims settlement,
rejection and pending ratios of all life insurers. However, the claim
settlement ratios of general insurers are usually over 100 per cent, which can
make it confusing. In such cases, you should look at the claims rejection
ratio, which is a measure of the number of claims rejected as against the total
number of claims. Also note the claims pending ratio, which refers to the
outstanding claims of the company.
The claims settlement
ratio may be more pertinent in case of general insurance companies with respect
to health, motor or home insurance, which are more claim intensive in nature.
In case of life insurance, death claims are usually accepted except in the most
extreme of cases or if the death occurs under suspicious circumstances within
the first year or so of the policy.
Of course, it must be
remembered that the claims settlement history of new life and general insurance
companies cannot be comparable to those of older life insurers which have been
in the business for a long time.
Have you seen the
policy long form and short form?
The company/agent may
not openly agree to share the policy long form. However, if you ask for a copy,
they cannot deny the same. This is important, as without the policy long form
you may miss out on the finer details of the policy during final negotiations.
For instance, if you
have mentioned any family medical history, the policy may include a cooling-off
period with respect to those medical conditions. These would be over and above
the general terms and conditions related with pre-existing conditions of the
health policy offered by the insurer. Similarly, in case of accident riders,
each company may follow a different definition, which can again work against
you in case of lack of clarity.
How strong is the
insurance company financially?
The solvency margin is
an extra capital/provision an insurance company has to maintain to meet claim
requirements. Solvency margins are declared by every company to the IRDA, and
this helps you understand the company’s ability to meet unforeseen
contingencies in terms of claim settlements. For example, a major accident is a
tremendous liability on the insurer but a higher solvency margin should cushion
such extreme situations comfortably.
