No Claim Bonus in Health Insurance

No claim bonus for health insurance is a reward offered by insurance companies to insured persons for not making a claim in a particular policy year. Policyholders receive this benefit as a discount on the renewal premium or an increase in the sum insured.

Insurers offer NCB to encourage individuals to reduce the number of claims. For each claim-free year, the insurance coverage may increase by 10-50% annually, subject to the policy terms and conditions.

A no-claim bonus accumulates over multiple claim-free years. It can also be transferred if you change the insurance provider (this depends on the insurer’s underwriting policies and plan equivalence).

Health insurance companies typically offer two types of no-claim bonus: a cumulative bonus and a premium discount. The following section explains both major of bonus on no claim in health insurance:

A no-claim bonus in health insurance works on the concept of “the longer you maintain a claim-free record, the more rewards you can receive from the insurance company”. Here’s how NCB in health insurance works:

• Claim-Free Year: If you do not file a claim during a policy year, you become eligible for a no-claim bonus, typically offered as either an increased sum insured or a reduced renewal premium.
• Filing a Claim: If you file a claim during the policy term, you lose the no-claim bonus for that policy year. This means that you are not eligible for the bonus, and the sum insured goes back to the base value.
• Policy Renewal: The benefits of the no-claim bonus are applied at the time of policy renewal. So, if you have a history of claim-free years, your sum insured will increase, or the premium will decrease when you renew the policy.

You need to understand the terms and conditions related to the no-claim bonus. Here are the common rules that you must be aware of:

• Eligibility Criteria: No-claim bonus benefits are offered if you do not file a claim during a policy year. Some insurers may offer NCB on minor claims, subject to certain terms and conditions.
• Low-Value or Partial Claims: Some insurance companies may retain the cumulative bonus after a partial or low-value claim. However, this is entirely subject to the insurer's terms and conditions.
• Maximum Limit on NCB: Most insurance providers limit the cumulative bonus to 50%-100% of the base sum insured.
• Transferability of NCB: The accumulated NCB can be transferred if you port your health insurance policy from one insurer to another under the IRDAI’s portability guidelines. This is subject to the new insurer's underwriting policies.

Super no claim bonus in health insurance refers to an advanced version of no-claim bonus. Although it is an in-built feature of some health insurance policies, it can be added to the policy by paying an additional premium.

The main difference between a no-claim bonus and a super no-claim bonus is that the latter increases the sum insured by an additional percentage on top of the already applied no-claim bonus.

For example, Mr Kumar purchased a health insurance with a ₹10 lakh sum insured. By maintaining multiple claim-free years, he has accumulated an additional sum insured of ₹5 lakh. Now, his total sum insured is ₹15 lakh. However, if a super no-claim bonus is applied, it will be calculated on the base sum insured only, i.e., ₹10 lakh.

No-claim bonus offers several advantages to the person insured and encourages them to follow a healthy lifestyle. Here are the major features of a no-claim bonus for health insurance, which make it an essential tool:

• For every claim-free year, NCB offers either a discount on the renewal premium or an increase in the sum insured.
• It can be accumulated over consecutive claim-free years, leading to a higher NCB benefit.
• It has a maximum limit, depending on the insurer. Beyond the limit, no further accumulation is possible.
• It applies to both individual and family floater health insurance plans.
• Resets to zero if the insured makes a health insurance claim during a policy year. Under a family floater plan, the NCB lapses when a family member makes a claim.

The no-claim bonus in health insurance plans rewards you by increasing the sum insured without extra cost. This offers financial protection during medical emergencies. Here are some of the major benefits offered by the no claim bonus in health insurance:

• Financial Savings: The most common advantage of a no-claim bonus is that it saves money by either increasing coverage or reducing the renewal premium. This allows you to get more from your health insurance.
• Additional Coverage: The cumulative bonus increases health insurance coverage over time. This helps cover higher medical expenses in emergencies.
• Transferable: No claim bonus can be transferred via health insurance portability. This helps you switch from one insurer to another.
• Incentive for Healthy Living: A no-claim bonus motivates you to adopt a healthier lifestyle to maintain a claim-free year. This, in return, generates cumulative NCB.
• Better Claim Settlement Record: Insurers value customers with claim-free years. This establishes a positive record for the insured. So, claim settlement becomes smoother, in case you file a claim in the future.

Some insurance providers offer an add-on cover for the no-claim bonus. This allows you to retain your accumulated NCB benefits even after making a claim during a policy year. This means the NCB remains intact and does not reduce or reset to zero after a claim.

You can purchase this add-on cover by paying an additional premium. However, read the policy terms and conditions beforehand to make an informed decision.

For every claim-free year, a cumulative bonus increases your health coverage by a fixed percentage of the base sum insured. Let’s see how the sum insured increases under a cumulative bonus with an example given below:

Suppose Suresh bought a ₹10 lakh health insurance policy. The policy offers a cumulative bonus of 10% on the sum insured, increasing to 50% for each claim-free year. If Suresh does not make a claim in the first year, the insurer will increase the base sum by 10% (₹1 lakh). Now, Suresh can file a claim of up to ₹11 lakh.

If Suresh does not file a claim in the second year, the base sum will increase by 20% (₹2 lakh). This allows him to claim up to ₹12 lakh. Similarly, if Suresh does not file a claim for 5 consecutive years, the insurer will increase the base sum by up to 50% (to ₹5 lakh). This will increase his total coverage from ₹10 lakh to ₹15 lakh.

An insured person can get the no-claim bonus benefits only when they do not file a claim during a given policy year. However, in case of a claim, the NCB for that year will lapse. Thus, they will not receive any increase in their base sum insured.

However, some insurance providers may allow the insured to retain the NCB in case of a minor claim, subject to the insurer's terms and conditions.

Yes, a no-claim bonus is available to both individual and family floater plans. If a person purchases an individual plan, the coverage extends only to the person insured. However, in a family floater plan, the coverage extends to the entire family.

Thus, the insured can avail the benefits of the no-claim bonus for every claim-free year, regardless of the plan they choose.

A no-claim bonus in health insurance is a valuable reward for you for maintaining claim-free policy years. It serves the dual purpose of increasing the overall value of the insurance plan while encouraging the insured person to stay healthy.

Over the years, accumulated bonuses can enhance financial protection against rising medical expenses. Hence, NCB helps increase your sum insured as well as offers long-term savings with a greater peace of mind.