Cumulative Bonus in Health Insurance

• A cumulative or no-claim bonus in health insurance is a reward offered by the insurance provider to the policyholder for not making any claims against their insurance during a policy year.
• It is one of the key benefits of health insurance plans that insurers have to offer.
• The no-claim bonus is beneficial for the policyholder as well as the insurance provider. This is because, keeping the no-claim bonus in mind, insurance holders refrain from making small claims against their policy, which benefits the insurance provider.
• For this, policyholders are rewarded with either a bonus in reduction of premium or an increased sum assured.

Cumulative Bonus Example

Let’s understand cumulative bonus meaning in health insurance with an example.
Let’s assume that Ms. Naina has invested in health insurance that offers ₹5 lakhs sum assured. Now, consider that her insurance provider offers her a cumulative bonus of 50% after every claim-free term:

• For the first claim-free cycle, Ms. Naina is eligible for an increased sum assured of ₹2.5 lakhs. In other words, she is eligible for a sum insured of ₹7.5 lakhs in the subsequent cycle.
• Similarly, upon the completion of another claim-free policy, Ms. Naina would again receive an increment of ₹2.5 lakhs, pushing her total sum assured to ₹10 lakhs,
• Alternatively, let’s assume that the sum insured for Ms. Naina’s medical insurance plan is ₹5 lakhs with a premium of ₹4000 payable annually: - Her insurer offers a bonus in reduction of premium by 10% for not raising a claim for a year. This would mean that she would have to pay only ₹3100 for the same sum assured at the time of policy renewal.
• Another tip to further enhance your savings is to buy health insurance online for a discount on your premiums.

The specifications of the no-claim bonus (NCB) offerings on health insurance may differ with each insurance provider. However, this is how the policy generally works:

Discount on Premiums - As mentioned earlier, this is a kind of reward that is offered by insurance providers to policyholders when they make no claims on their health insurance for one year. In this instance, the insurance company would offer a discounted premium for the same sum assured to the insurance holder for their subsequent cycle. - Not all insurance policies will offer a no-claim bonus and the benefits of the bonus will differ with each insurance provider. So, when you buy health insurance online, it is important to check this feature and get a policy that offers a no-claim bonus. - It makes the policy more affordable in the long run.

Cumulative Bonus - With a cumulative bonus, the sum assured on your medical insurance plan is increased if you have made no claims for one year. This way, you can get more out of your health insurance for the same premium payable. - Under cumulative bonus, the increase in the sum insured depends on the percentage offered by the insurance provider and may vary from insurer to insurer. There is, however, a limit to the coverage that can be increased via cumulative bonus. - Typically, this limit is between 50% to 100% of the original sum assured.

Add-On Coverage - When you buy health insurance online, you will see the option of enhancing your policy with add-on covers such as coverage for critical illnesses, income replacement, accidents, etc. - The add-on cover you choose at the time of policy purchase will also receive the benefit of the no-claim bonus.

Here are the important things to remember about the cumulative bonus in health insurance: -

After the completion of one claim-free term, this is the bonus that your insurance provider rewards you with. This reward is a risk-mitigation practice offered to the policyholder for being responsible and cautious.

• Typically, the reward is either a no-claim bonus where your premiums are reduced or you get an increased sum assured. The increased coverage offers additional protection for the policyholder without the increased cost of maintaining a claim-free record. Conversely, a bonus in reduction of premium is awarded for responsible behaviour.

• It helps you get more out of your money by offering a higher sum assured. This enhanced financial protection can be especially beneficial in situations where the actual expenses incurred exceed the standard coverage amount.

• Depending on the terms and conditions of the insurance provider, the policyholder can also pay less for the same coverage

• Small medical expenses, such as routine check-ups, minor treatments, or medications, may not always meet the threshold required for a standard insurance claim. So, these expenses can be settled with the help of the cumulative bonus.

• It is a great encouragement to help you lead an active and healthier lifestyle. It showcases how maintaining a healthy lifestyle comes with tangible benefits.

A cumulative bonus on your health insurance is a great way to enhance your healthcare policy without paying an extra premium. It encourages policyholders to lead a healthier lifestyle and avoid raising unnecessary claims. This offers the dual benefits of improving your health as well as safeguarding your finances. Most individual as well as health insurance plans for family plans in India offer the NCB as part of the policy coverage, Tata AIG happens to be one of them! We always recommend checking policy wordings and carefully checking what type of NCB bonus is offered under your chosen medical insurance plan so you can make an informed decision before purchasing.

What happens to my cumulative bonus if my health insurance lapses?

As long as your medical insurance plan is active, your cumulative bonus remains active. However, if your policy lapses, you can lose your no-claim bonus or your cumulative bonus and your record will have to start from scratch. This is why it is essential to renew your health insurance promptly.

Do all health insurance plans offer a no-claim bonus (NCB)?

No. Not every insurance plan in India will offer a no-claim bonus. Moreover, the benefits of the NCB will differ with each insurance provider. So, before investing in a health plan, you must carefully read all the policy documents.

The no-claim bonus makes an insurance policy more pocket-friendly in the long run, it is advised to seek insurance that comes with an NCB.

What happens if I raise a claim with an NCB cover on my health insurance?

Once you raise a claim against your health insurance, your cumulative bonus is reset. This means that the policy coverage starts from the initial sum insured again. However, the specifications will differ from one financial product to the next.

Is the NCB available for add-ons?

Yes, some insurance providers will include the add-on for the NCB or the cumulative bonus to increase the increment percentage in either the sum insured or as a discount on the policy premiums.