No claim bonus in health insurance

There are two main types of no-claim bonuses that insurance companies offer to their customers:

• Increase in sum assured (cumulative benefit): Under this type of no claim bonus, no discount is given but the sum assured is increased. Thus, the policyholders are given an increased sum assured for the same premium during policy renewal as a reward for a year of no claims filed.
• Discount on premium: As the name suggests, this type of no claim bonus can get you a discount on the premium. This discount is available at the time of policy renewal, thus, giving policyholders a chance to continue with their health insurance plan at a discounted rate.

The objective of health insurance is to provide financial security to the insured or their family at the time of any medical emergency or health problem. No claim bonus is given by the insurer to encourage the consumers to remain healthy and to file a claim only when necessary.

(Read more: What does health insurance cover)

Since the medical condition faced by the policyholder is not always major or serious, some of them tend to settle minor expenses out of their own pocket. This is how many policyholders do not end up filing a claim every year and become eligible for the no-claim bonus.

For example, suppose you have a health insurance policy with a sum insured of Rs 5 lakhs and have not made any claims during the policy term. In this case, the insurer gives you an additional benefit of 5% for each claim-free year (the year in which the claim is not made). Thus, the total sum insured after each claim-free year will be as follows:

• Sum insured after the first claim-free year = Rs 5,25,000
• Sum insured after the second claim-free year = Rs 5,50,000
• Sum insured after the third claim-free year = Rs 5,75,000

For an example of a discount on premium, let's say Mr X has an insurance policy of Rs 5 lakhs, for which Rs 5,000 is to be paid as a premium. Since there were no claims during the policy term, the insurance company offered them a discount of 10% on the premium. Thus, Mr X will now have to pay Rs 4,500 as a premium instead of Rs 5,000.

Overall, either way, you can ensure better financial security for yourself and your family in case of a medical emergency. The benefit of the no-claim bonus encourages policyholders to stay healthy and fit while making people aware that medical claims should be made only when it is absolutely necessary. The benefit of a no-claim bonus in personal health insurance and family health insurance is offered by most health insurance companies in India. However, there may be some difference in the percentage of discount offered depending on the policy and the insurance company.

Some features of a no-claim bonus in health insurance include the following: 

• The no-claim bonus offered by Indian insurance companies ranges between 5 and 20% on average.
• No-claim bonus remains active in case you want to switch to another health insurance company (portability).
• In the case of a family floater policy, you cannot avail of the no-claim bonus amount if any member of the family has made a claim.
• If your health insurance policy is not renewed before the due date i.e. the date of payment of premium, you will not be eligible for the bonus.

(Read more: Difference between health insurance and life insurance)

An add-on is an additional benefit that can be opted for in health insurance. If you’ve taken a policy and after some time you want to add a new service to it, then you will have to pay an extra amount for that new service. The no-claim bonus add-on can increase the percentage of bonus at the time of renewal in case an insured does not file a claim.

Note that purchasing this add-on will increase the premium payable by you for the policy. Hence, it is suggested to analyze the premium and your health condition before opting for this add-on.

The most important benefit of the no-claim bonus is that you can save money while renewing the policy or your sum insured can be increased, which is also a kind of saving. The rate of increase in sum-insured can range from 5% to 50%. In case the hospital bill is not very high, then self-payment can be done as by doing so you will be entitled to a no-claim bonus. Apart from this, you can also make the most of the cumulative benefit.

(Read more: Cheapest health insurance)

Everyone likes to receive a bonus, especially when you don’t have to put in any effort to earn it. While most health insurance companies in India offer the facility of a no-claim bonus, not all of them do so. Apart from this, the terms and conditions of what they offer may vary, which is why it is advised to read the policy bond carefully while buying the insurance policy so that you know whether it offers a no-claim bonus facility or not. If it does, it’s good to know by what percentage the sum insured can be increased or the premium decreased.

(Read more: Grace period in health insurance)