No claim bonus is a simple way an insurance company rewards its policyholder for having a claim-free year. You might have heard of no claim bonus while purchasing car insurance, but did you know it is applicable even for health insurance? In fact, often no claim bonus is stated as one of the most important factors to consider while buying a health plan.
In this blog, we will talk about the 4 important factors of no claim bonus in health insurance that every policyholder should be aware of.
There are two types of no claim bonus in health insurance:
For health insurance, no claim bonus works in two ways – (i) cumulative bonus and (ii) discount in premium. Let’s understand each of them with examples.
(i) Cumulative bonus:
For having a claim-free year, when your coverage amount is increased but the premium amount remains the same it is a cumulative no-claim bonus.
For example, you have a health insurance policy of Rs 5 lakh and your insurer provides a 5% no-claim bonus for every claim-free year. So in the first year, if you haven’t made any health insurance claims your coverage amount would increase to Rs 5.25 lakh for the same premium amount. Similarly, for two consecutive claim-free years, your coverage amount would be Rs 5.5 lakh, and so on. That means, in the third year, if you need to be hospitalised you can claim up to Rs 5.5 lakh.
| Increase of health coverage amount for a 5% cumulative no-claim bonus | ||
| Year | Amount increased per year as no claim bonus | Coverage amount |
| Year 1 (when the health plan was bought) | – | ₹5 Lakh |
| Year 2 (for the claim-free first year) | ₹25,000 | ₹5.25 lakh |
| Year 3 (for claim-free second year) | ₹25,000 | ₹5.5 lakh |
(ii) Discount on premium
In the case of a discount on premium for no claim bonus, for every claim-free year, the premium amount decreases by a certain percentage, though the coverage amount remains the same.
Let’s suppose you have a health insurance policy of Rs 5 lakh for which you pay a premium of Rs 10,000 per year. Now your insurer offers a 5 percent discount on premium as no claim bonus for every claim-free year. So if you do not make any health insurance claim in the first year, then during the policy renewal you would have to pay Rs 9,500. But the coverage amount would remain the same.
However, among the two, the cumulative no-claim bonus is far more popular and is offered by many insurers.
Limit on Coverage Increase
Though the coverage amount is increased through a cumulative no-claim bonus in health insurance, there is a limit to it. Usually, this limit ranges between 50 percent to 100 percent. The terms and conditions may differ for different insurance companies.
For example, let’s suppose you have a Rs 2 lakh health policy, and your insurer allows up to 50% increase through a cumulative no-claim bonus. That means, your coverage amount can be increased by another Rs 1 lakh, i.e. from Rs 2 to 3 lakh, and not beyond that.
No claim bonus is applicable for individual and also floater health policies
Individual health plans are policies that cover only the policyholder, while floater policies provide health insurance to the entire family. So if you have an individual policy and you do not make any health insurance claims the entire year, you receive no claim bonus. Similarly in the case of a floater policy, if no member covered under it makes any health insurance claim for a whole year, then they get no claim bonus in the next year.
Not all health policies offer a no-claim bonus
Not all health insurance policies offer no claim bonus. Also for those health policies that offer no claim bonus, each has its terms and conditions. So read the fine print of the health insurance copy to know whether it has no claim bonus. If yes, then what are the terms and conditions. For example, what is the percentage of no claim bonus, by how much the coverage amount can be increased etc.
No claim bonus is one of the most important factors to consider while buying health insurance. So while comparing policies, look at the terms and conditions for no claim bonus. Select the one that suits you the best. For example, let’s suppose you have an individual health policy of Rs 10 lakh, and you pay a high premium for it. Then you can go for a policy that provides a discount on premium for no claim bonus.
Bottom Line
Today due to medical inflation, the cost of hospitalization and other medical expenses have risen significantly. Under such circumstances, a no-claim bonus is a great way to boost up your health insurance coverage. So stay fit and healthy and get the most out of your health insurance.