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Investing your hard-earned money in health insurance may seem like a financial burden at first, but it pays off several-fold in case of a medical emergency. But what happens if you don’t raise a claim during a policy term? Is your investment wasted that year? Fortunately not! Health insurers offer a special incentive for customers who stay healthy and don’t avail of claims. It’s called “Cumulative Bonus” (CB). Read ahead to know more about Cumulative Bonus in health insurance.
Cumulative Bonus; also known as No Claim Bonus, is a reward that insurers offer their customers for abstaining from raising claims. The usual offerings are either a discount on the policy premium or an increase in the sum insured in the forthcoming policy term. Both of these are subject to an upper limit.
As explained earlier, a Cumulative Bonus is an incentive that health insurers give their customers after the completion of a claim-free term. The usual incentive offered by health insurers is an increment in the sum insured from up to 5 to 50% of the total insured amount. The increment ends after it matches the total amount of the initial sum insured.
So, what happens if you avail a claim after receiving one or more Claim Bonuses? If you make a claim after receiving one or more Claim Bonuses, you will lose the increment you received from the previous term’s Claim Bonus. The loss will be at the same rate as the increment. So, if the increment is at 10% of the sum insured, you will lose your accumulated bonus at the same rate.
Example: Mr. Vinoth purchases a health insurance policy that insures him for a sum of Rs. 5 lakhs. And his insurer offers a Cumulative Bonus of 50% of the insured amount after the completion of every claim-free term. Then, for the first claim-free cycle, Mr. Vinoth will be eligible for an increase in the sum insured of Rs. 2.5 lakhs. Meaning, in the following cycle he will be eligible for a sum insured of Rs. 7.5 lakhs.
In the same manner, once he completes another claim-free policy cycle, he will be eligible for another increment of Rs. 2.5 lakhs. And his total sum insured will increase to Rs. 10 lakhs. Since now the total increment he has received (now Rs. 5 lakhs) matches the initial insured amount, he will not be eligible for an increase in the following cycle. And if he makes a claim, he will lose the increment gained from the previous cycle, in the forthcoming cycle.
The following are the important benefits of a Cumulative Bonus.
You will get rewarded by your health insurer after the completion of a claim-free term.
The reward is either a discounted policy premium or an increment in the sum insured.
You can avoid paying a higher premium for more coverage and thus save money.
Alternatively, you could pay less for the same coverage (depending on the insurer’s terms and conditions).
You can accumulate your Cumulative Bonus up to a policy period of 10 years.
You can settle small medical expenses and use the Cumulative Bonus on a rainy day.
It encourages you to stay healthy and avoid medical expenses.
Usually, a Mediclaim Policy refers to an insurance plan that offers financial protection against medical emergencies. Some of the inclusions of this plan include accidents, sudden illness and surgeries, etc. A Mediclaim policy offers lesser coverage than a conventional health insurance policy. However, in the context of Cumulative Bonuses, both policies offer similar incentives.
You may have heard the term “No Claim Bonus” or “NCB” used in the context of car/bike Insurance. It is used to denote a discount offered by insurers after the completion of a claim-free term by the insured. However, in the context of health insurance, No Claim Bonus and Cumulative Bonus are used interchangeably. That being said, Cumulative Bonus is the more commonly used term.
Although the terminology is similar, the implication for the term “No Claim Bonus” is slightly different in health insurance and motor insurance. In car/bike insurance, it only refers to a discount on the policy premium offered by an insurer. However, in health insurance, it could mean either a discount on the policy premium or an increase in the sum insured. It depends on the terms and conditions of the health insurer.
The following are a few additional benefits of a Cumulative Bonus in health insurance.
Fortunately, Cumulative Bonus is not affected by regular health check-ups. So you can avail these without any worry of losing your bonus.
Cumulative Bonus is applicable for both individual and floater health insurance plans. So, you can enjoy this benefit in both plans.
With inflation occurring periodically in the country, an increase in the sum insured will definitely aid in keeping up with rising costs.
Investing in health insurance gives returns whether or not you make a claim during a policy term. Health insurers reward customers who stay fit and do not raise any claims by offering them a Cumulative Bonus in the successive term. The Cumulative Bonus can either be a decrease in the policy premium or an increase in the sum insured. Either way, you will benefit. So, try to settle small medical expenses yourself and enjoy more financial protection in the future.
Your cumulative bonus is applicable as long as you keep your health insurance policy active. That is why it is essential to renew your policy on time. If you do not follow timely policy renewal, you could lose your entire Cumulative Bonus and you will have to start again from scratch.
If you are able to port your health insurance plan before it expires, your Cumulative Bonus can be transferred. However, it will be subject to the terms of the new health insurance provider. Always make sure to read the Cumulative Bonus clause in the policy document before buying a health insurance policy. Also, if you are 45 years of age or below, you can transfer the entire bonus amount. And if you are above the age of 45 you can transfer up to 50% of the bonus amount.
Usually, it is not possible to get 100% discount. Health insurers have an upper-limit on the discounts they offer under Cumulative Bonuses. The maximum discount offered by an insurance provider will be subject to this limit.
Usually, health insurers offer up to a 100% increment of the sum insured. However, the increment per cycle, may vary from 5 to 50% of the total insured amount. The percentage of increment per cycle depends on the terms and conditions of the health insurance provider.
Yes, certain health insurance providers offer an add-on for No Claim/Cumulative Bonus to increase the percentage of increment in the policy premium discount or the sum insured. However, there is a limit to the increase.