Your health or medical insurance secures you and your family’s health and financial future against unforeseen medical expenses. The benefits of health insurance mainly include coverage against medical expenses, cashless treatment facilities, health rewards, annual health check-ups, and e-medical opinions. Apart from all these common benefits, one of the lesser-known but highly beneficial aspects of health insurance is the No Claim Bonus (NCB) or Cumulative Bonus (CB).
With the No Claim Bonus, you can maximize your health benefits. Through this, you can enjoy an increased sum insured or get a discount on the premium for each claim-free year. While choosing health insurance, you should choose a health insurance plan with a maximum No Claim Bonus for each claim-free year so that your sum insured increases. If the term No Claim Bonus (NCB) or Cumulative Bonus (CB) is new to you, keep reading this blog till the end to know everything about these bonuses.
What is No Claim Bonus (NCB) in Health Insurance?
NCB in health insurance refers to a no-claim bonus. The insurance company rewards policyholders who do not make any claims during the policy year with a discount. Often, policyholders refrain from filing claims for a year or two because they have not experienced any illness or have managed to stay healthy, thus avoiding hospital expenses. As a result, they receive a no-claim bonus under their health insurance plan.
Typically, the NCB lowers the premium for the following year or increases the sum insured, encouraging policyholders to avoid making small or unnecessary claims.
Different Types of No Claim Bonus (NCB)
There are two types of no-claim bonuses in health insurance:
- Cumulative Benefit
- Discount on Premium
Cumulative Benefit Means a Higher Sum Insured
Some health insurance policies offer cumulative benefits, where a percentage of the sum insured is added to the existing coverage for each claim-free year. In this case, the coverage amount increases, but the premium remains the same.
To understand this, let us take an example: if you have a health insurance policy of ₹20 lakh, let’s assume your insurer offers a 5% no-claim bonus for each claim-free year. Then:
- In the first year, if you haven’t made any health insurance claims, your coverage amount will increase per year to ₹21 lakh (₹20 lakh + 5%).
- Similarly, if you don’t make any claims for two consecutive years, your coverage amount will reach ₹22 lakh (₹21 lakh + (₹20 lakh*5%), and so on. This way, in the third year, if you require hospitalization, then you can claim up to ₹22 lakh.
- If you haven’t raised any claim for five years in a row. Here are the details of your bonus.
| Year | Event | Amount increased per year as a no-claim bonus | Coverage amount |
|---|---|---|---|
| Year 1 | When the health plan was bought | – | ₹20 Lakh |
| Year 2 | For the claim-free first year | ₹1 Lakh | ₹21 Lakh |
| Year 3 | For claim-free second-year | ₹1 Lakh | ₹22 Lakh |
| Year 4 | For claim-free third-year | ₹1 Lakh | ₹23 Lakh |
| Year 5 | For claim-free fourth-year | ₹1 Lakh | ₹24 Lakh |
Limit on Coverage Increase
You know that a cumulative no-claim bonus in health insurance increases coverage, but it has a limit. The coverage amount can be increased only up to a certain limit, usually between 50 percent and 100 percent.
It must be understood that the terms and conditions of different insurance companies may be different. For example, suppose you have a health policy of ₹20 lakh, and your insurer allows an increase of up to 50% through a cumulative no-claim bonus. This means that your coverage amount can be increased by another ₹10 lakh, which will finally increase your coverage from ₹20 lakh to ₹30 lakh; it will not increase more than this.
Discount on Premium
Discount on premium means, for every claim-free year, the premium amount reduces by a certain percentage, though the coverage amount remains the same.
For example, suppose you have a health insurance policy of ₹20 lakh for which you pay a premium of ₹10,000 per year. Now suppose your insurer offers a 5 percent discount on the premium as a no-claim bonus for every claim-free year. So, if you do not make any health insurance claim in the first year, you will have to pay ₹9,500 (₹10,000 – (₹10,000*5%)) during policy renewal. But the coverage amount will remain the same.
Similarly, if you do not submit a claim for five consecutive years, your premium will be reduced to ₹8,000 (80% of your initial premium amount).
| Year | Event | Coverage amount | Premium decrease per year as a no-claim bonus | Net premium payable |
|---|---|---|---|---|
| Year 1 | When the health plan was bought | ₹20 Lakh | – | ₹10,000 |
| Year 2 | For the claim-free first year | ₹20 Lakh | ₹500 (₹10,000*5%) | ₹9,500 |
| Year 3 | For claim-free second-year | ₹20 Lakh | ₹500 (₹10,000*5%) | ₹9,000 |
| Year 4 | For claim-free third-year | ₹20 Lakh | ₹500 (₹10,000*5%) | ₹8,500 |
| Year 5 | For claim-free fourth-year | ₹20 Lakh | ₹500 (₹10,000*5%) | ₹8,000 |
Cumulative Benefit and Discount on Premium out of the two, a cumulative no-claim bonus is more popular and is offered by many insurance companies.
How Does No Claim Bonus in Health Insurance Work?
A no-claim bonus (NCB) in health insurance is a reward insurance companies give to policyholders who do not make any claims during the policy year. If no claims are made, the insurer offers a discount or a bonus on the renewal premium or increases the sum insured for the next policy year.
Here’s how it typically works:
- Premium discount: The insurer may offer a discount on the premium when renewing the policy, usually ranging from 5% to 50%, depending on the number of claim-free years.
- Increase in coverage: Some insurers increase the sum insured by a certain percentage (for example, 10-50%) for additional premium charges.
- Carry forward: Sometimes, the no-claim bonus may be carried forward if the policyholder switches to a different insurer.
The exact terms of the No Claim Bonus vary from one insurer to another, so it’s important to check the details in the policy terms.
Do All Health Insurance Plans Offer No Claim Bonus?
No, not all health insurance plans in India offer No Claim Bonus (NCB). The availability of a no-claim bonus depends on the insurance company and the specific plan. However, it is not guaranteed with all policies, so it is important to read the fine print of the health insurance copy to check the details of the specific health insurance plan you are considering to see if it offers NCB. If it does offer NCB, find out what its terms and conditions are, for example, what is the percentage of the No Claim Bonus, how much the coverage amount can be increased, etc.
Add-On Cover for No-Claim Bonus in Health Insurance
Some insurance providers provide their consumers with the option to add the no-claim bonus as an extra benefit in insurance terms generally called an add-on. The consumer must pay a higher premium in this situation to purchase the rider. With a no-claim bonus rider with a health insurance plan, the consumer can avail of the rewards even after filing claims on their health insurance.
The terms and conditions of the policy should be carefully reviewed before purchasing to determine whether your issuer offers health insurance with the No Claim Bonus add-on.
How to Avail No Claim Bonus
To avail the No Claim Bonus, you need to ensure that you do not make any claims during the policy year. Here are some tips to help you maximize the NCB:
- Choose the right health insurance plan: First and foremost, you need to choose the right health insurance plan that offers adequate NCB. Some plans offer up to 100% of the sum insured from time to time, while others may limit it to a lower percentage.
- Maintain a healthy lifestyle: The second most important point is to stay healthy. By staying healthy and avoiding unnecessary medical interventions, you can ensure that you do not need to file a claim.
- Be aware of exclusions: As we mentioned above, whenever you choose an insurance policy, read the terms and conditions. Here too, you need to understand the exclusions in your policy to avoid filing a claim for conditions that are not covered. This way, you can preserve your NCB for genuine emergencies.
- Renew your policy on time: Next, you must also ensure that you renew your health policy before the due date. If your policy lapses, you may lose the accumulated NCB, and it may not be possible to restore it later.
- Consider a top-up plan: If you feel that your existing sum insured is insufficient, you can consider buying a top-up plan instead of making small claims. This will help you preserve your no-claim bonus while providing you with additional coverage.
What Happens If You Make A Claim?
If you make a claim, it may result in the loss of the accumulated no-claim bonus. Some policies may also reduce the bonus or reset it to zero after a claim.
Key Points for an Effective No-Claim Bonus
- All family members are eligible to avail themselves of the no-claim bonus protection cover if they have opted for a family floater plan.
- If your hospital bill is small and manageable, you can pay it yourself without making a claim. This will help you enjoy the cumulative benefits of your health insurance plan.
- Compare the claim settlement ratio. This metric shows how many claims the insurer settled out of the total received in a financial year. A ratio of less than 90% could indicate problems.
- Another important consideration is the list of hospitals affiliated with the insurance provider. Check the network hospital details on the insurer’s website to see the list of eligible hospitals in your city.
- Review the list of diseases covered under different plans. Also, read the policy wording of your preferred insurer to understand the claim process and list of exclusions.
Conclusion
In conclusion, a no-claim bonus (NCB) in health insurance serves as an incentive for policyholders to remain healthy and avoid making claims. It typically results in a premium discount or an increase in the sum insured for each claim-free year. The NCB encourages responsible behavior that benefits both insurers and policyholders and helps lower insurance costs over time. However, it is important to note that not all health insurance policies offer NCB, and the specifics of how it is applied can vary between providers.
FAQ’s
What Happens to the No Claim Bonus in Health Insurance if I Do Not Renew My Policy?
As you know, every health insurance policy has a term. Whenever a person buys a health insurance plan, he has the option to choose a term, which can be one to five years, depending on the insurer and the type of policy.
If the policyholder chooses to renew every year, he can get the policy renewed by paying the premium each year. Along with this, policyholders also have the option of paying a lump sum premium for all these years and avoiding the hassle of renewing the policy annually. However, if a policyholder does not renew the policy before the expiry date, it will expire.
If so, the policyholder will not receive the benefits that come with health policy renewal. Moreover, the accumulated coverage amount under the No Claim Bonus will not be available to policyholders who do not renew their policies on time.
If policyholders still renew after that, they may face penalties, such as higher premiums, no coverage, or restarting waiting periods.
Is the No Claim Bonus transferable?
Yes, it is simple to transfer the no-claim bonus. The policyholder has the option to move the no-claim bonus benefit from one health insurance plan to another from a different insurance provider. At the time of policy renewal or through the health insurance policy’s portability, this can be transferred.
Is the No Claim Bonus Applicable to All Health Insurance Policies?
Not all health insurance policies offer NCB. It depends on the insurer and the specific policy terms. You should verify this with your insurance provider before purchasing the policy.
Does the No Claim Bonus Apply to Both Individual and Family Floater Plans?
In India, a no-claim bonus is available for both individual and family floater health insurance policies. For the former, the sum insured covers the medical necessities of one person who is the only policyholder. However, for the latter plan, the sum insured covers the policyholder and his/her family members. In the case of both of these plans, your insurer will reward you with a no-claim bonus in health insurance for every cumulative claim-free period.
Can I Lose My No-Claim Bonus If I Make a Claim?
Yes, making a claim may result in the loss of the accumulated no-claim bonus. Some policies may also reduce the bonus or reset it to zero after a claim.
What is the Maximum No Claim Bonus I Can Receive?
The maximum NCB varies between insurance providers. It is typically a percentage of your sum insured and may range from 10% to 50% depending on the insurer and the number of claim-free years.
Does the No Claim Bonus apply to all types of claims?
Generally, NCB applies only to medical claims. However, certain types of claims, like those related to hospitalization or surgeries, may affect your eligibility for the bonus. Always check your policy details for specific exclusions.
How Many Times Can We Claim Health Insurance?
Depending on your sum insured limit, you may file multiple claims under your health insurance policy over the policy period.
How Can I Claim a No-Claim Bonus?
Usually, the insurer will automatically apply the no-claim bonus for your next policy renewal if no claims have been made during the policy year. You do not need to file a separate claim for the bonus.
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