What is no-claim bonus in Health Insurance

A 'No-Claim Bonus' refers to the additional coverage offered by the insurers to the policyholders for not making any claims during a policy period. Most of the insurance companies provide a no-claim bonus of 5% or higher on the sum assured.  This benefit can be extremely helpful to the policyholders in covering additional medical costs incurred due to the unexpected hospitalization. 

Let us explore everything about a no-claim bonus in detail, its forms, features, benefits, and how this works to your advantage.

What are the types of no-claim bonus?

No-claim bonus typically comes in two different forms-

Discount on Premium: Under this, the benefit is offered to the policyholder in the form of discounts on the premium paid for the insurance policy renewal. In this cost-saving feature, the sum insured amount remains the same, while the insurance premium is lesser.

Cumulative Benefit: Under this form, no discount on premium is offered to the policyholders but they get an increase in the sum insured. Thus, policyholders are rewarded with an increased sum insured during policy renewal for not raising a claim during a policy period.

Example of no-claim bonus

Let us understand how the no-claim bonus works with a simple example.

An individual has taken a health insurance policy worth Rs. 2 lakhs. The insurance company offers 5% of the cumulative no-claim bonus for not raising a claim with a maximum limit of 50%. Thus, the total sum insured available after the end of every claim-free year would be-

Sum insured available after 1st no-claim year= Rs. 2 lakh 10 thousand

Sum insured available after 2nd no-claim years = Rs. 2 lakh 20 thousand

Sum insured available after 3rd no-claim years = Rs. 2 lakh 30 thousand

Here, the maximum cumulative benefit available on the sum insured is capped at Rs. 3 lakhs (50% of the original sum insured amount). A no-claim bonus feature enables you for maximum coverage with an increased sum insured amount every year.

Features of no-claim bonus

  • If there is no claim in the first year then the insurer offers an additional 5% on the sum assured
  •  In the case of family floater plans, all the members who are covered under the policy are entitled to the no-claim bonus
  • The policyholders will not lose out the no-claim bonus if a low-value claim is filed.
  • No-claim bonus is often served as a discount/rebate on the premium payable, provided the policy is renewed within 30 days.
  •  The no-claim bonus is disbursed in the same way as it was provided or as part of the insured sum after the premium has been deducted
  • If an insurance policy expires and is not renewed within the time limit, the benefits of the no-claim bonus also expire.
  • If multiple claims are made within the same policy period, the available sum insured including the cumulative no-claim bonus benefit will be taken into consideration.

Benefits offered by no-claim bonus

  • No-claim bonus encourages policyholders to remain healthy and enjoy rewards for not claiming during the previous year
  • It also minimizes the cases of fraud or unnecessary claims
  • It can be easily transferred during the portability
  • Helps as a financial cushion in times of rising healthcare costs

When is the no-claim bonus offered in health insurance?

In health insurance, a no-claim bonus is offered to the insured at the time of policy renewal. Insurance companies also offer a no-claim bonus during the term of the health insurance policy. There can be a boost in the sum insured, in the form of a bonus that cumulatively increases in value instead of the usual no-claim bonus. Those companies that do not offer no-claim bonus typically offer a rebate on the premium payable or cumulative benefits.

Bottom Line

No-claim bonus in health insurance is of great importance to the policyholders. Being an incentive for remaining healthy, a no-claim bonus coverage on your health insurance plan can help you to tide over any medical emergency in the future.