Posted on: Jan 5, 2026 | 3 mins | Written by: HDFC ERGO Team

What Is Renewal Bonus in Health Insurance?

Renewal bonus in health insurance

Health insurance is usually seen as something you rely on during medical emergencies, but it also has its rewards when you stay healthy. One such benefit is the renewal bonus. When you go through a policy year without making a claim and renew on time, insurers reward you with added benefits at renewal. Over the years, these bonuses can quietly increase your coverage or lower your costs, helping you make smarter, long-term decisions beyond just choosing a basic sum insured.

Understanding Renewal Bonus (No Claim Bonus)

In the health insurance space, renewal bonus and no-claim bonus are often used interchangeably. Both refer to benefits linked to claim-free policy years.

Put simply, when you do not make a claim, you have not cost the insurer anything that year. To acknowledge this, they reward you at renewal by adding extra value to your policy. When this happens year after year, the benefit grows quietly in the background, giving you a larger safety net to handle hospital expenses whenever the need arises.

However, the exact structure, how much bonus is added, how often, and up to what limit, depends on the policy terms. That is why reading the policy document carefully is essential.

Types of Renewal Bonuses

Renewal bonuses are generally offered in two formats:

• Cumulative Bonus

A cumulative bonus is a simple reward for staying claim-free. Every year you do not make a claim, your health cover goes up automatically when you renew the policy. The increase is usually a fixed percentage of your original sum insured and continues year after year, up to a set limit mentioned in the policy.

For instance, if your base cover is ₹5 lakh and the bonus is 10%, your sum insured increases by ₹50,000 after one claim-free year. Keep renewing without claims, and this extra cover keeps adding up, giving you higher protection over time without paying anything extra.

• Discount on Premium

Under this, the insurer offers a discount on the renewal premium if no claim was made in the previous year, instead of increasing the sum insured. This directly reduces your out-of-pocket cost for continuing the policy.

While premium discounts are not as commonly offered, some policies do include this option. The biggest benefit here is instant savings on your renewal cost. However, unlike cumulative bonuses, this benefit does not increase your sum insured over time, so it may not add the same level of long-term coverage value.

How Renewal Bonus Works

The renewal bonus is applied at the end of a policy year, provided no claims were made during that period. When you renew your policy, the insurer automatically adjusts the sum insured or premium as per the bonus structure mentioned in the policy wording.

If you make a claim in a later policy year, the bonus you have built up may go down or reset. In some policies, the reduction is partial, while in others the bonus may be removed altogether after a claim. That said, your original sum insured usually remains unchanged; the impact is limited to the bonus amount.

It is also important to maintain continuity. Renewal bonuses are available only when the policy is renewed on time. Even a short break in renewal can lead to loss of accumulated bonus and other continuity benefits.

Benefits for Policyholders

Renewal bonuses offer several long-term advantages to you as a policyholder, such as:

• Enhanced coverage without extra cost: Your sum insured grows over time without paying an additional premium.

• Better protection against medical inflation: Rising hospital costs are better managed with an increasing cover.

• Encourages mindful use of insurance: You are less likely to make small or unnecessary claims.

• Improves value over the long term: The longer you stay claim-free, the more valuable your policy becomes.

Conditions and Limits

While renewal bonuses are attractive, they come with certain conditions and limitations, like:

• The policy must be renewed on time without any gap.

• There is usually a maximum cap on the total bonus that can be accumulated.

• Claims may lead to partial or complete reduction of the bonus.

• Bonuses may apply only to hospitalisation-related benefits and not to every policy feature.

These conditions vary from policy to policy, making it important to review the policy wording before assuming the extent of benefits.

Renewal Bonus vs No-Claim Bonus

There is no major difference between a renewal bonus and a no-claim bonus. Both are rewards linked to completing a policy year without claims.

The table below shows the renewal bonus vs no-claim bonus

Aspect Cumulative Bonus Premium Discount
Primary benefit Increases the total sum insured Reduces the out-of-pocket renewal cost
Frequency Added after every claim-free year. Applied at the time of renewal
Maximum Limit Usually capped at 50%-100% of base cover Limited to a specific percentage of the premium
Impact of claims Accumulated bonus is reduced or reset Discount is removed for the next year
Long-term value Higher protection against medical inflation Immediate savings; no growth in coverage
Availability Standard feature in most modern policies. Less common; found in specific plans.

Conclusion

A renewal bonus is one of the most valuable yet often underestimated features of health insurance. By maintaining a claim-free record and renewing your policy on time, you can steadily increase your coverage or reduce your costs without additional investment. When you renew or buy health insurance, understanding and leveraging renewal bonuses can make it far more effective and rewarding over the long term as healthcare costs rise.


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


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