Home / Money / Personal Finance /  Claim settlement ratio is a good metric to choose right insurers

How is the insurance claim received out of a benefit plan taxed? I have not incurred any expense for medical conditions but have received a claim from an insurance company under the policy. Will the claim amount received be taxable?

—Name withheld on request


There is no specific provision in the Income Tax Act about the exemption for benefit proceeds from fixed benefit policies. Reimbursement of health insurance claims is widely considered tax-free, as this is a reimbursement of expenses and not an income. Also, death benefit under life insurance policies are specifically exempt under Section 10(10)D.


If a person who bought a new car with comprehensive insurance of three years has died, can the kin close the insurance and claim refund (with the new owner purchasing fresh insurance) or should it be transferred to the new owner with a name change endorsement?

—Vivek Jain


If you sell your vehicle, you can cancel your policy and claim a refund. In the case of a three-year policy, you will be entitled to get a complete refund of premium for the complete year left in the block of three years. Additionally, if there has been no claim, you will be entitled to a short-period refund for the unexpired partial year for the own damage section. The short period scale is a pre-defined table of the proportion of premium to be charged for part-year. Refund as per short period scale will be lesser than that on a pro-rata basis.


What is the role of ratios in a life insurance policy? How can they help you buy the right health policy?

—Vishal Kant


Ratios are performance indicators that you can use to evaluate insurers. The Insurance Regulatory and Development Authority of India (Irdai) in its annual report publishes these metrics for all insurers. Claim settlement ratio is one good metric to shortlist insurers. Insurers with more than a 95% claim settlement ratio are likely to offer a better claims experience to policyholders.

Abhishek Bondia is principal officer and managing director,

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