• No-claim Bonus in Health Insurance

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    No-claim bonus refers to the bonus amount that gets accumulated to the sum insured amount for every claim-free year. In other words, it is the reward offered by the insurer for not making any claim during a particular policy period. It is estimated that medical inflation is rising at the rate of 15% to 20% every year. With this drastic rise in medical costs every year, the no-claim bonus benefit offered by a health insurance policy can be extremely helpful in covering additional medical costs incurred during an unexpected hospitalisation.

    Two Forms of No-Claim Bonus

    No-claim bonus typically comes in two different forms.

    • Discount on premium amount charged for a policy
    • Cumulative benefits offered in the form of higher sum insured amount

    No-claim Bonus in Health Insurance

    No-claim bonus (NCB) is a common thing in health insurance. The type of NCB offered and the discount rate provided vary from one insurer to another. However, almost all health insurance service providers in the country offer NCB benefit in one form or another. NCB is one of the ways which an insurer can reward a policyholder for staying healthy and not making frequent claims.

    When it comes to health insurance, cumulative benefit is the most common form of NCB benefit offered to policyholders. However, certain state-owned insurance service providers like Oriental Insurance provide NCB in the form of premium discounts on policies for every claim-free year.

    Most of the private health insurance service providers in the market offer cumulative benefit to their customers. In cumulative benefit, a significant percentage is added to the sum insured amount for every claim-free year. However, there is a specific limit on the maximum amount that can be obtained as no-claim bonus. Typically, most health insurers allow up to 50% on cumulative NCB.

    Example of No-claim Bonus

    Now that we have understood what no-claim bonus means, let’s check out how it works with a simple example. A person has a health insurance policy for Rs.2 lakh. The insurer offers 5% of cumulative NCB for every claim-free year with a maximum of 50%. The total sum insured available after the end of every claim-free year can be given as follows.

    Sum insured available after 1 claim-free year = Rs.2 lakh 10 thousand

    Sum insured available after 2 claim-free years = Rs.2 lakh 20 thousand

    Sum insured available after 3 claim-free years = Rs.2 lakh 30 thousand

    Here, the maximum cumulative benefit available on sum insured is capped at Rs.3 lakh (50% of the original sum insured amount). The insured can obtain maximum coverage as per the new sum insured amount every year.

    Features of Cumulative NCB in Health Insurance

    Some of the key features of NCB available in health insurance can be listed as follows.

    • Most insurers offer NCB in the range of 5% to 10% for every claim-free year.
    • The accrued NCB benefit can be transferred when transferring the policy to another service provider.
    • If a policy expires for non payment of premium within the grace period, the accrued NCB benefit also expires.
    • If multiple claims are made within the same policy period, the available sum insured including the cumulative NCB benefit is taken into consideration.
    • In family floater policies, NCB benefit can be used by any of the covered family members.
    • As per the new IRDAI regulations, the total accrued NCB will not lost after filing a low value claim.*

    *You can check with your insurer to know how much of the cumulative bonus will be lost after filing a claim.

    Add-on Cover for NCB in Health Insurance

    All health insurance companies offer a fixed percentage for no-claim bonus. However, some insurers offer an add-on cover to boost the percentage offered as NCB. Some add-on covers can help boost NCB up to 50% in a single year. There is typically a limit on the maximum amount that can be obtained as NCB. For instance, the No Claim Bonus Super add-on cover offered by Religare provides 50% boost of the sum insured in a single year. The maximum limit here is capped at 100% of the sum insured.

    FAQs on no-claim bonus in health insurance

    1. Will the insured member lose out on the no-claim bonus benefit if he/ she switches from individual to floater or vice versa?
    2. No, the benefits will not be lost but the amount or percentage may be affected based on whether you switch from individual to floater or floater to individual and whether your sum insured amount was increased or not.

    3. Will new members of the policy also be able to enjoy the no-claim benefits?
    4. Generally, only previously insured members of the policy will enjoy the no-claim benefits. The new members will have to complete a claim-free year to avail the benefits.

    5. Will the no-claim benefit be affected if I don’t renew the policy and then switch the insurer?
    6. The no-claim benefit is generally transferred to the new policy if the member chooses to port to another insurance company’s policy. If the insured does not renew the policy, he/she will lose out on the benefits. Hence, there is no question of transfer of benefits to the new insurer as there are no benefits to be transferred.

    7. Is there a possibility that I get a 100% premium discount under the no-claim bonus benefit?
    8. Most insurance companies specify a limit under the no-claim bonus clause. The maximum discount on the premium amount or an increase in the sum insured amount will depend on the limit specified.

    9. Are any no-claim add-on covers available?
    10. Yes, certain insurance companies offer add-ons for the cumulative bonus which increase the benefit provided to the insured member.

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