Maximising the Benefits of Cumulative Bonus in Health Insurance

Health insurance is your financial shield. The median amount for which health insurance claims are made is Rs. 42,000 in India, and only 15% of Indians claimed more than Rs. 1 lakh. Even more shockingly, only 0.2% of Indians claimed more than Rs. 10 lakh from health insurance companies. 

So, does investing in health insurance go to waste if you don’t make any health insurance claim in a policy year? Not many know that they can get the cumulative bonus for a claim-free year! 

Let’s explore how insurance companies reward you for maintaining good health without making any claims. 

Understanding Cumulative Bonus

Cumulative bonus is the benefit your insurer provides for not making any claim during a policy period. Depending on the policy provider, this cumulative bonus can be: 

1.  used to increase the total sum insured or 
2. decrease the premium for the next policy period. 

While you are entitled to make health insurance claims, your claims reduce profitability for insurers. They provide cumulative bonuses as an incentive not to make claims for small expenses and to maintain good health. 

Coverage Increase

For instance, Ashish has insurance coverage of Rs. 5 lakhs with cumulative bonus of 10%. For every claim-free year, his insured sum will increase by 10%. After five claim-free years, his coverage will reach Rs. 7.5 lakh, while his insurance premium remains the same. 

Premium Reduction

If the insurer offers a 5% premium for every claim-free year, then Akash, who pays a premium of Rs. 10,000, needs to pay only Rs. 9500 for the second year. This is because he did not make any claim in the previous year. Similarly, if he doesn’t make any claim for five years, his premium will be reduced to Rs. 7,500 without any change in coverage.  

Watch Out!

Some insurers will reduce the sum insured at the same bonus rate. 

In that case, for Ashish, after five claim-free years, if he makes a claim in the sixth year, the sum insured will become Rs. 6,25,000. 

With the cumulative bonus protector option, you will not lose the entire accumulated cumulative bonus after making a claim. This option will protect a full or partial bonus. However, this depends on the insurance provider. 

No Claim Bonus and Cumulative Bonus – Are They the Same?

The No Claim Bonus (NCB) is popular with motor insurance. Insurers offer NCB when you drive carefully and don’t make any claims in a policy year. This NCB usually results in a premium discount. 

Cumulative bonus is the same as NCB when we are talking about health insurance. The cumulative bonus option is applicable for individual and family floater plans. However, it is not available for group insurance. 

Generally, cumulative bonuses or NCB are transferable, allowing you to carry your benefits to another provider if you decide to switch at the renewal time. However, for health insurance, the cumulative bonus may not be used for specific dental, cosmetic procedures, or maternity treatments. It’s important to check with your insurance provider for any hidden clause when using cumulative bonus benefits. 

Tips To Leverage Cumulative Bonus Benefits

Depending on your policy terms and conditions, it is better to accumulate a cumulative bonus instead of making claims for minor medical expenses. Following are some tips to take advantage of your policy benefits: 

• Slash insurance costs – Offers in terms of premium discounts will help you to reduce insurance costs in the future. All you need to do is maintain a healthy lifestyle to prevent or delay diseases and illness. Also, you can choose to pay smaller medical expenses out of pocket instead of making a claim, because it is beneficial in the long run.
• Increased coverage for the future – Some insurers allow you to increase the sum insured by 100% if you don’t make claims for 10 years. With this option, you can increase coverage for yourself and your family in the future without any premium increase. When you buy insurance early, you have the greatest potential to accumulate this bonus for at least 5 to 10 years, allowing you to expand coverage. 
• Portable and continuous coverage – Cumulative bonus is for the individual. So, if you want to switch to a better health insurance plan or change your insurer, you can carry forward the cumulative bonus. This portability gives you the freedom to focus only on health benefits. Also, it ensures continuous coverage because you will be motivated to renew your policy without any break to accrue this bonus benefit. 

Key Takeaways

The cumulative bonus is your reward for maintaining a healthy lifestyle and choosing not to claim minor medical expenses. The premium discounts and increased coverage allow policyholders to carry forward their benefits to the future. However, before choosing an insurance provider with bonus benefits, understand the coverage amount, premiums, waiting periods, and claim processing efficiency. This allows you to select a transparent insurer to redeem your health bonus easily.  

Consider exploring insurance options on platforms like PhonePe for a seamless and informed decision-making experience.