Why claim settlement ratio will not help you choose a term life insurance policy

Claim settlement ratios (CSR) published by IRDA do not represent the probability of claim acceptance. Most private insurers have a claim settlement ratio comparable to that of LIC. Therefore the CSR will not help you choose a term life insurance policy. At best, CSRs would help you reject a few insurers. Here are some insights from IRDAs Annual report 2016-17.

The claim settlement ratio should have never been a criterion for selecting term insurance policy because there is zero evidence to support it Thanks to irresponsible bloggers and reporters, it became popular. Search for “claim settlement ratio” in Google today and the first link’s title is: “Claim Settlement Ratio for Term Insurance by IRDAI”. Google may be using AI, but it is still an algorithm. Who will educate it that IRDA does not differentiate between CSR of pure term life insurance and investment-mixed policies which are still extremely popular? read more

Will Life Insurance Claim Be Denied Without a Valid Driver’s License?

Will a life insurance claim be denied if the insured died in an accident where he was the driver without a valid driver’s license or valid vehicle insurance? Thanks to a question by Ganapathy Krishnan at Facebook group, Asan Ideas for Wealth, I was able to obtain an authoritative answer to this question from the insurance ombudsman case files.

I am not one to beat around the bush. So the answer to the question is, NO, the life insurance claim will not be denied if the driver met with an accident without a valid drivers license and/or vehicle insurance. read more

Are You Sure That A Term Life Insurance of One Crore is Sufficient?!

Everyone wishes they were a crorepati and this seems apparent from the sum insured chosen for a  term life insurance policy! Why is everyone buying a “one crore” policy? Because it is a large sum? One followed by seven zeros (ten million) is just a number. It may or may not be the right number for your family. Here is why it is important to calculate to the life insurance policy cover you need before you purchase a term life insurance policy. read more

Why Time is Money and How Life Insurance Plans Exploit it!

Benjamin Franklin wrote in 1748 that Time is Money in a note titled “Advice to a Young Tradesman”. This can be used in multiple ways and in this post, I use it to explain an important idea known as the Time Value of Money. Shall try to follow it up with other examples in future posts.

Journalist Yogita Khatri did an article for ET Wealth as to why traditional life insurance plans should be avoided (link below) that includes my inputs.  I expand on some of the numbers provided to her. read more

How ULIP Charges Reduce Returns!

The charges associated with a Unit linked Insurance Plan (ULIP) can significantly impact the returns from the policy. A two-part discussion on ULIPS: first how charges reduce returns and then a category-wise study of ULIP returns and how to compare them with mutual funds.

This post is entirely due to an interesting thread started by Guru Rudagi at Facebook group Asan Ideas for Wealth with key comments from Ramesh Mangal (one of my personal finance influencers) and Butan Mohapatra who took the trouble of sending me his ULIP statement with a detailed explanation. read more