What is No Claim or Cumulative Bonus in Health Insurance?

Posted on: May 28, 2019 | | Written by:

What is No Claim or Cumulative Bonus in Health Insurance?

The recent COVID-19 pandemic has been an eye-opener for everyone around the world. It made us realise how important it is to maintain good health and keep an adequate medical insurance policy handy for such stressful times. A good health insurance plan can cover a chunk of your hospital bills and keep your finances intact.

Considering that most health insurance plans for family and individuals are available at affordable rates, you can easily take the right healthcare plan and stay covered. What's more, the no-claim or cumulative bonus offered by insurers can help reduce policy premiums by a certain percentage and make health insurance more affordable.

Let's understand what no claim or cumulative bonus is in health insurance and how it works.

What is no claim bonus in health insurance?

The no-claim bonus (NCB) or cumulative bonus is a monetary reward that you receive from the insurance company for not making any claims during the policy period of one year.

The no-claim bonus benefits policyholders as well as insurance companies. Keeping the no-claim bonus in mind, many policyholders refrain from filing small claims with the insurance company, which can be beneficial for the insurance provider. On the other hand, policyholders enjoy the bonus in the form of reduced premiums or increased sum insured.

How does no claim bonus work in health insurance?

The no-claim bonus health insurance or cumulative bonus can differ from insurer to insurer. The following are some common ways in which NCB works:

1. Discount on premium :

If you do not make any health insurance claims during a policy period, the insurance company will offer a no-claim bonus in the form of reduced premiums. For instance, the sum insured of your healthcare plan is INR 10 lakh, and the premium amount is INR 9000 annually. If the insurer offers a no-claim bonus of 10% on policy premiums, you will have to pay a reduced premium of INR 8100 for the same sum insured at the time of policy renewal.

2. Cumulative bonus :

This type of bonus can increase the sum insured of your health insurance policy. For instance, you have a healthcare plan with the sum insured of INR 10 lakh. For every claim-free year, the insurance provider increases the sum insured by 10%. Hence, your policy coverage will increase to INR 11 lakh after the first claim-free year. If you do not raise a claim for the second consecutive year, the sum insured will increase to INR 12 lakh and so on for every consecutive claim-free year.

3. Add-on cover bonus :

If you took an add-on cover at the time of policy purchase, you would also receive a no-claim bonus on the add-on cover.

Types of no claim bonus

There are two categories of health insurance no claim bonus:

1. No-claim bonus on policy premiums :

Under this type, insurance providers offer a discount on health insurance premiums if the policyholders don't file any claims during the plan's tenure.

2. Cumulative benefit on the sum insured :

Some insurance companies also offer a cumulative bonus for every claim-free year. If policyholders don't file claims during the entire policy term, the insurer will offer a bonus in the form of an increased sum insured without increasing the premium amount.

Advantages of no-claim bonus in health insurance

The main benefit of a no-claim bonus in health insurance is that it helps you save money on your insurance policy.

A no-claim benefit on policy premiums will lower the premium amount and help you save money.

On the other hand, the cumulative bonus will increase the sum insured of your healthcare plan. This benefit can help you meet your hospital bills in case of multiple hospitalisations during a policy term.

How much will the sum insured increase under a cumulative bonus?

This will depend on the percentage of the cumulative bonus that the insurance company offers. The percentage can be between 5% and 50%, and it may vary from insurer to insurer.

For example, if you have a sum insured of INR 5 lakh and a cumulative bonus of 10%, your sum insured will increase and become INR 5.5 lakh.

However, there is a limit to the coverage that can be increased through a cumulative bonus. In most cases, this limit can be anywhere between 50% and 100% of the original sum insured.

Do all healthcare policies in India provide a no-claim bonus?

No, not all health insurance plans in India offer a no-claim bonus. Also, the no-claim bonus benefits vary from insurer to insurer. So, before buying health insurance, make sure you read through the policy documents carefully to know about the NCB benefits.

Since a no-claim bonus can make health insurance more affordable in the long run, it is wise to take a policy with NCB benefits. This benefit is available for health insurance plans for family as well as individuals, so you can compare a few policies with no-claim bonus benefits and choose one that best fits your requirements and pocket.

How does an enhanced cumulative bonus work?

Enhanced cumulative bonus is a special condition in which the percentage of cumulative bonus increases with every claim-free year.

For instance, you have a healthcare plan that comes with a sum insured of INR 10 lakh. You did not make any claims in the first year, so you got a cumulative bonus of 10% on the sum insured. This will increase the sum insured to INR 11 lakh for the next policy period. If you don't make any claims in the second consecutive year, the sum insured will increase by 20% of the original amount, thereby making the total sum insured INR 12 lakh. This is how enhanced cumulative bonus works.

Conclusion

No claim or cumulative bonus is a significant benefit health insurance companies offer. While no claim bonus can help reduce your policy premiums, the cumulative bonus can increase the sum insured and save you from out-of-pocket expenses in case of multiple hospitalisations during a policy period. Since most individual and family health insurance plans in India offer no claim bonus benefits to policyholders, you can compare some policies and select the most suitable option. Buy the right health insurance plans for yourself and your loved ones and stay covered against medical expenses.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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