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Concept of No Claim or Cumulative Bonus in Health Insurance

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While reading articles written by health insurance companies or their feature offerings, you must have a come across the word ‘no claim bonus’ or ‘cumulative bonus’. Both these words mean the same. It basically conveys the benefit that an insurance company offers the insurer for making no claims in a policy year. This benefit is passed on for the renewal year in the form of increase in sum insured increase for which there is no premium hike. In a nut shell, it is a reward for staying fit and not registering any claims with your health insurance company.

Let’s get this straight, we all love bonuses. Similarly, if you get a bonus of sum insured without paying anything extra you will definitely feel elated. But this reward is offered only when you do not make any claims. The bonus keeps increasing up to maximum 200 % of your sum insured. This means that if you accumulate 5% of cumulative bonus in the coming years, your coverage will keep on increasing indirectly helping you for higher cover due to inflation.

With HDFC ERGO, there exists a concept of Enhanced Cumulative Bonus. This feature will help you increase your cumulative bonus every year. So if you are eligible for a sum insured hike of 5%,and if you opt for enhanced cumulative bonus, you will get a sum insured increase of 10%.

How it works?

If Mr. Ram has bought a health insurance plan with sum insured 5 lacs and he did not register any claim in the first policy year, at the time of renewal he will get a cumulative bonus of 5% so his total sum insured for next year will be Rs. 5, 25, 000. He can now make claim up to this amount instead of Rs. 5 lakhs.

Similarly, in the second year if he again does not register a claim he gets a cumulative bonus of 5% so again he gets a sum insured increase due to which his sum insured with cumulative bonus will be Rs. 5,50,000. This bonus can go up to 100% of sum insured.

How enhanced cumulative bonus works?

If Mr. Ram has bought a health insurance plan with sum insured 5 lakhs and he did not register any claim in the first policy year, at the time of renewal he will get a cumulative bonus of 10% so his total sum insured for next year will be Rs. 5, 50,000. He can now make claim up to this amount instead of Rs. 5 lakhs.

Similarly, in the second year if he again does not register a claim he gets a cumulative bonus of 20% so again he gets a sum insured increase due to which his sum insured with cumulative bonus will be Rs. 6,00,000.

Take away: The idea is to claim only when it is genuinely needed. Making claims at times hampers your claim history and insurance companies may increase your premium depending upon the frequency of registering the claim. If you do not make any claims, it’s an indication that you are leading a healthy lifestyle. Staying fit is the key so that you don’t end up falling sick and make claims. Your no claim bonus or cumulative bonus will keep rising to a good extent so that it covers you when you just need it the most.