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
Benefits offered by no-claim bonus
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.
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.