To attract more investors, many insurance providers today offer attractive features with their insurance plans such as “No Claim Bonus” more popularly known as NCB. No Claim Bonus is a health insurance bonus given to an insurance holder for each year that the insurance is not claimed. This can be continually availed even if the insurance plan is renewed.
For those individuals who have opted for health insurance plans, here is all that they need to know about the concept of ‘no claim bonus’.
What is No Claim Bonus (NCB) in health insurance?
No Claim Bonus is a type of reward given to a policyholder for not making any claims under a health insurance policy during a policy year. It acts as additional support for the policyholder to bear medical expenses in the future when he/she needs to use the health insurance. Most insurance companies offer a no-claim bonus of 5% or more on the sum assured. Those insurers who do not provide a no-claim bonus mostly give rebates on the premium or offer cumulative benefits.
Types of No Claim Bonus in health insurance:
No claim bonus is commonly offered to eligible policyholders by private and public sector insurance providers in India. There are two different types of no claim bonuses in India:
- Cumulative Benefit – Under this type, instead of discount policyholders can get an increase in the sum insured. Policyholders are rewarded for not raising a claim with an addition to the sum insured during policy renewal.
Understanding through an example – Nitin does not make a claim for his Rs. 5,00,000 health policy. At the time of renewing the plan, his insurer offers a 10% addition to his sum insured . This makes the total sum insured Rs. 5,50,000. If he does not make a claim in the next year too, the cumulative benefit will result in the sum insured becoming Rs. 6,00,000.
Some insurers may cap the cumulative benefit limit to 50%. This means the additional sum insured cannot go beyond 50% of the original value. Continuing the example, Nitin’s sum insured can rise up to Rs. 7,50,000 for five consecutive claim-free years. After reaching this amount, his bonus benefit will cease.
- Discount on Premium – This option offers a discount on the premium payable during policy renewal in case no claim is made during a policy year. Policyholders can therefore continue their health insurance at a discounted rate.
Understanding through an example – Nitin has a policy with a sum insured of Rs. 5,00,000 and a premium amount of Rs. 5,000. If no claim is raised during the policy period, the insurer will offer him a discount of 10%. Thus, Nitin pays only Rs. 4,500 for plan renewal and saves Rs. 500.
Features of no claim bonus
Few noteworthy features of no claim bonus in a health insurance are:
- No claim bonus offered by most Indian insurers is between 5 to 20% of sum assured.
- In case a policyholder wishes to switch to a different health insurance company, the accumulated no claim bonus remains active.
- No claim bonus amount added to the sum insured can be availed by a family member if covered within a Family Floater policy.
Benefits of no claim bonus (NCB)
No claim bonus in health insurance plans benefits policyholders as mentioned below:
Additional sum insured
With increasing medical expenses, an individual’s existing health policy may be inadequate in meeting the rising healthcare costs. A no claim bonus makes the policyholder eligible for an additional sum insured and acts as a saving grace with this reward for a claim-free year.
No claim bonus can be easily transferred during the portability. Accrued benefits are transferable by the policyholder in case he/she wants to switch to a different insurer.
With increased coverage, a no claim bonus feature acts as additional financial protection for a family’s savings during rising healthcare costs. It provides the required financial aid during a health crisis.
This feature ensures maximum cover since the sum insured cannot go below the original value even in case of multiple claims.
Encourages healthy living
When policyholders get benefits in the form of no claim bonus, they are motivated to remain healthy so that claims can be avoided.
A no-claim bonus is beneficial to policyholders as it results in savings and provides extra cushion to cover healthcare costs. By making no claims in a policy year, policyholders can enjoy additional cover for medical emergencies that may arise in the future. Indirectly, it also encourages policyholders to lead a healthy lifestyle to avoid making claims during a year.
- Will I lose my accumulated no claim bonus if I switch from an individual plan to a Family Floater plan?
No, the no claim bonus remains intact even if you switch from an Individual plan to a Family Floater plan. There could be certain limitations attached, depending upon the terms and conditions of the insurer.
- Will my accumulated no claim bonus remain if I don’t renew my policy?
No claim bonus is applicable only at the time of renewing your healthcare plan. In case you do not renew it, the policy is deactivated and your accumulated NCB will not be accessible.
- Through no claim bonus, how much discount on the premium can I get during policy renewal?
The discount applicable under no claim bonus during policy renewal is as per the terms and conditions laid out by the insurance company.
- Can I increase my no claim bonus benefit?
You purchase a no claim bonus as an add-on if you want to increase the percentage of benefit that can be availed.
- Is cumulative bonus better than discount on premium in no claim bonus?
Both these offer benefits to the policyholder and it is individual preference to select either. Some people would like to avail a discount on the premium while others may prefer the sum insured to be increased under no claim bonus benefit.