What is no-claims bonus?
When you do not avail of any health insurance benefits by not making a claim for a year, your insurer rewards you by means of a no-claims benefit (NCB). The no-claims benefit can be in the form of:
A discount on the yearly premium for your policy
Cumulative benefits through an increase in the sum assured
Cumulative benefit is commonly offered by several health insurance providers as a reward to their customers. Most private health insurance providers offer such cumulative benefits wherein the sum assured is increased by a specific percentage after every claim-free year. The maximum percentage that is usually offered as NCB is 50%.
Certain public-sector insurance service providers offer NCB through discounts on premium for every claim-free year.
Benefits of no-claims bonus
With costs of healthcare increasing by about 15% to 20% every year, health insurance no-claims bonus can be of great help in meeting the rising expenses.
Example of No-claim Bonus
Here’s an example to help you understand how health insurance no-claim bonus works.
You have a health insurance policy for Rs.2 lakh. The insurer raises the sum assured at 5% of the base sum for every claim-free year, up to a maximum of 50%. The total sum insured available after every claim-free year will increase as follows.
In this scenario, the maximum cumulative benefit would be at Rs. 3 lakh (50% of the original sum insured amount).
What happens when you file a claim?
Rules have now improved and you don’t lose the entire bonus when you make a claim, but the setback is still serious.
As per the new rules, the cumulative bonus accrued may be reduced at the same rate at which it was accrued for the year in which the claim was made.
In the example above, if you made a claim in the fourth year, the sum insured would be reduced by 5% and would come down to 2 lakh 20 thousand. Yet another claim would result in the sum assured dropping by another 5%.
It is important to remember that if you don’t make a claim in the next year, you will again get a bonus. That is, for a claim-free year after you make a claim, you are entitled to a bonus again.
Also, only the bonus amount can be reduced for making a claim, and not the base sum insured. In other words, the base sum insured (Rs2 lakh in the above example) is not affected at all.
Here are a few points to note about No-claim bonus:
NCB is offered in the range of 5% to 50% for every claim-free year
If you transfer to another service provider, the NCB accrued can also be transferred
If the policy expires (isn’t renewed on time), so does the NCB
Any of the covered family members can use the NCB benefit in family floater policies