Understanding No Claim Bonus in Health Insurance Policy

Table of Contents

What is a No Claim Bonus in Health Insurance?

No Claim Bonus (NCB), also known as Cumulative Bonus, in a Health Insurance Policy is defined as an increase or addition in the Sum Insured of the Policy granted by the Insurance Company to the Policyholder without an associated increase in Premium. So, if there are no Claims under the expiring Health Insurance Policy, the Policyholder receives a benefit in the form of increased Sum Insured under the Policy. No Claim Bonus in a Health Insurance Policy is a bonus granted by the Insurance Company to the Policyholder for every claim-free year under the Insurance Policy. No Claim Bonus is an important feature of a Health Insurance Policy.

No cliam Bonus In the Helath Insurance Policy In India

How does No Claim Bonus Work?

The working of No Claim Bonus varies from one Insurance Company to another. However the basic principle remains the same. Health Insurance Policies specify the percentage rate of increase of No Claim Bonus per year for each Claim-Free year and also have a cap on the Maximum No Claim Bonus that the Insured is eligible for under the Policy. For example, a Health Insurance Policy specifies that the No Claim Bonus under the Policy is 20% of Basic Sum Insured per year subject to a maximum of 100%. This means that if a Policyholder has a Health Insurance Policy with a Basic Sum Insured of Rs10 lakhs, his Sum Insured will increase by Rs2 lakhs for every claim free year until it reaches a maximum Sum Insured of Rs20 lakhs.

The step-by-step guide on working of No Claim Bonus is listed below:

  1. Claim-Free Year under Health Insurance Policy: If a Policyholder does not make any claims during a Policy Year, he become eligible for NCB under his Health Insurance Policy.
  2. Renewal of Policy: Upon renewal of Health Insurance Policy, the Insurance Company increases the Sum Insured of the Policy by granting a No Claim Bonus of a specified percentage.
  3. Accumulation: NCB benefits accumulate over subsequent Claim-Free Years, providing substantial benefits over time.

The working of an NCB is better understood with the help of an example listed below:

Claim-Free Year Sum Insured (Rs.) No Claim Bonus (Rs) Limit of Coverage (Rs.)
1st Year 10,00,000 2,00,000 12,00,000
2nd Year 10,00,000 2,00,000 14,00,000
3rd Year 10,00,000 2,00,000 16,00,000
4th Year 10,00,000 2,00,000 18,00,000
5th Year 10,00,000 2,00,000 20,00,000

What happens to No Claim Bonus in case of a Claim?

Some Health Insurance Policies reduce the accrued Bonus by one stage if there is an Insurance Claim under the Policy. So, in the above example, if there is a Claim in the 4th year under the Policy, the Accrued Bonus reduces by Rs2 lakhs and the Sum Insured reduces from Rs16 lakhs to Rs14 lakhs. However, there are some health Insurance Policies where the Cumulative Bonus does not reduce inspite of filing an Insurance Claim under the Policy.

Benefits of No Claim Bonus (NCB) in Health Insurance

  1. No Claim Bonus in a Health Insurance Policy provides increased Health Insurance Coverage in the form of higher Sum Insured without a corresponding increase in Insurance Premium. This is important because No Claim Bonus effectively reduces the cost of a Health Insurance Policy at a time when the Medical Expenses and Health Insurance Premiums are skyrocketing.
  2. No Claim Bonus also works as a Loyalty Bonus as it incentivises the Policyholder to renew his Health Insurance Policy to avail higher Sum Insured at the same Premium.

Does every Health Insurance Plan in India provide a No Claim Bonus?

No. All Health Insurance Policies do not provide a No-Claim Bonus. Therefore, it is essential that the Policyholder carefully reads the Health Insurance Policy Wordings before purchasing the Policy to ensure whether a No Claim Bonus is offered or not. Additionally, it is necessary that the Policyholder understand the Policy’s Terms and Conditions with respect to NCB. For example, what is the Percentage of NCB, what happens to NCB in case of a Claim etc.

Bottom Line

A No-Claim Bonus is an important feature of Health Insurance Policy and Policyholders should make sure to understand the nitty-gritties of No-Claim Bonus with the help of an experienced Insurance Agent or Insurance Broker. Qian is an experienced Insurance Broker for Health Insurance Policies. If you have any queries regarding Health Insurance, reach out to us via email at insurance@qian.co.in or call us on 022-35134695. We would be glad to assist you.

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