No Claim Bonus (NCB) in Health Insurance

What is a No Claim Bonus in Health Insurance?

No Claim Bonus (NCB) is a renewal benefit offered to policyholders who do not file any claims in their policy year. Also known as the Cumulative Bonus, it increases the sum insured of a health insurance policy without hiking the premium or provides a discount on the renewal premium. Insurers use NCB to reward policyholders for having a claim-free year and renewing their policies. Thus, No Claim Bonus is great way of reducing health insurance premiums.

Types of No Claim Bonus in Health Insurance

No Claim Bonus in health insurance is of two types:

1. Cumulative Bonus

   Cumulative Bonus is a type of No Claim Bonus where the sum insured or the coverage amount of the policy increases by a certain percentage if the policyholder has a claim-free year. However, the premium of the policy remains the same despite an increase in the coverage amount.

   For instance, suppose you have a mediclaim policy of ₹5 lakh, and the insurer provides a cumulative bonus of 5% for every claim-free year. So, if you do not raise any claim in the first year of the policy, your sum insured will increase by 5%, i.e. ₹25,000. Thus, the coverage amount for the second policy year will be ₹5.25 lakh with no change in the premium. This means you can file a claim for up to ₹5.25 lakh in the second year.

   Similarly, if you do not file any claim for two consecutive years, the sum insured of your policy will again increase by 5%, i.e. ₹25,000. Therefore, the coverage amount for the third year of the policy will be ₹5.5 lakh for the same premium amount.

2. Discount on Premium

   Under this type of No Claim Bonus, a discount on the renewal premium for up to a specific percentage is offered to the policyholder for every claim-free year. This discount can either be used at every claim-free year or can be accumulated for consecutive claim-free years to get a bigger discount on premiums. However, the sum insured of the policy does not change in this case.

   For example, suppose you have purchased a health insurance policy with a sum insured of ₹5 lakh in exchange for an annual premium of ₹10,000. The insurance company offers a discount of 5% on the renewal premium for every claim-free year as the No Claim Bonus. Thus, if you do not file a claim in the first policy year, you will get a 5% premium discount, which comes to ₹500.

Hence, you will have to pay only ₹9,500 as the premium for the second year at the time of renewing your policy, with no change in the sum insured amount.

How Does No Claim Bonus Work in Health Insurance?

No Claim Bonus works in health insurance either as an increase in the sum insured amount or a discount in the renewal premium. Besides, policyholders have the option to use their No Claim Bonus every claim-free year or accumulate it for consecutive claim-free years to get a bigger discount/ increase in the sum insured. The more are the number of claim-free years, the bigger will be No Claim Bonus.

However, NCB comes with a maximum limit for discount on premium and enhancement in sum insured. For example, a 10% NCB is granted on every claim-free year for a maximum of 50%. Once the policyholder reaches the maximum limit, no additional NCB be rewarded. Hence, it is advised to use the No Claim Bonus once you reach the maximum NCB limit.

Moreover, the NCB restores to zero after a health insurance claim is raised. However, the NCB can be accumulated again for subsequent claim-free years once the claim is paid.

Features of No Claim Bonus in Health Insurance

Check out some of the key features of No Claim Bonus:

• It provides a renewal premium discount or increases the sum insured for every claim-free year.
• It can be accumulated for consecutive claim-free years to get a bigger NCB benefit.
• It has a maximum NCB limit, after which NCB accumulation stops.
• It restores to zero once a health insurance claim is filed.
• It is available for both individual and family floater plans.
• In family health insurance plans, NCB is restored to zero if any of the insured family members file a claim.

Benefits of No Claim Bonus

Take a look at some of the key benefits of No Claim Bonus for policyholders:

• Lower Premiums - It reduces the cost of renewing the health insurance policy by getting more coverage at a lower premium.
• Increased Sum Insured – It increases the sum insured of the mediclaim policy for the same premium amount, thereby offering enhanced coverage during claims.
• NCB is Transferrable – NCB is a reward offered to the policyholder for every claim-free year and, hence, is transferred in case of health insurance portability.
• Financial Protection - No Claim Bonus helps policyholders to ensure additional financial coverage for their family at the time of a medical emergency.
• Healthy Lifestyle - No Claim Bonus encourages the insured to stay healthy and file a claim only when it is absolutely required.

Which Add-on Cover is Available for No Claim Bonus in Health Insurance?

Several health insurance companies offer No Claim Bonus Protection as an add-on cover to safeguard the accumulated NCB. With the NCB Protection cover, the accumulated No Claim Bonus percentage remains the same even if the policyholder files a claim in the previous policy year. However, this add-on is available on the payment of an additional premium.

Note: The NCB protection cover may be known by different names under different insurers.

How Much the Sum Insured Will Increase Under Cumulative Bonus?

The sum insured of the policy will increase through cumulative bonus up to the limit specified in the policy documents. Generally, the coverage amount can be increased for up to 50%, 100% or 150% of the original sum insured, depending on the plan. Hence, you must go through the policy documents of your medical insurance policy to know the exact cumulative bonus limit.

For instance, say you have a health insurance policy of ₹2 lakh, and your insurance company offers a cumulative bonus of up to 50%. In this case, the coverage amount of your policy can be increased by a maximum of ₹1 lakh, which is 50% of the base sum insured amount. Thus, your sum insured can increase up to a ₹3 lakh.

Is No Claim Bonus Available in Individual and Family Health Insurance Plans?

No Claim Bonus is available under both individual and family health insurance plans. Under the individual health insurance policy, the coverage is offered only to the policyholder, whereas a family floater policy provides coverage to the entire family under a single sum insured. So, policyholders can get a No Claim Bonus for every claim-free year regardless of having an individual or family floater health insurance policy.

Do All Health Insurance Plans in India Offer No Claim Bonus?

No.

Not every health insurance plan in India offers No Claim Bonus. Besides, plans that do offer No Claim Bonus come with their own terms and conditions. Thus, it is very crucial to read the policy documents carefully while purchasing the policy to know whether it offers NCB. Also, make sure to clearly understand the terms and conditions of the policy related to NCB.

Difference Between No Claim Bonus and Cumulative Bonus

The following table highlights the difference between No Claim Bonus and Cumulative Bonus: