What is No-Claim Bonus (NCB) in Health Insurance?


Your health is your most valued asset. Health Insurance plans can secure the health and financial future of yourself and your family. Having a Health Insurance policy has many benefits, such as coverage against medical expenses, cashless treatment facility, wellness rewards, annual health check-ups, e-medical opinion and many more. Besides the usual benefits from the Health Insurance plan, there are other benefits that come to you when you have a Health Insurance policy which is continuously in force without a break. One such continuity benefit is  No-Claim Bonus (NCB) or Cumulative Bonus (CB).  

What is No-Claim Bonus?

No-Claim Bonus or Cumulative Bonus is an increase or addition in the Sum Insured granted by the insurer without any associated increase in Premium. In simple terms, it is a reward to the policyholders for not making any claims during the policy year.  

Let’s say, Ms Nila has bought a Star Comprehensive Health Insurance Policy for a Sum Insured of Rs. 5 lakhs. She would be entitled to the benefit of No-Claim Bonus, calculated at 50% of the Sum Insured per year under her policy, following the claim-free years up to a maximum of 100%. Once the Bonus accrues under the policy, the limit of coverage for the policyholder for any subsequent claim will be the Sum Insured together with the Bonus.

How does No-Claim Bonus work?

No-Claim Bonus applies to both individual and floater Health Insurance policies.

Here is an example to show how the Sum Insured gets enhanced for every claim-free year by way of No-Claim Bonus. 

Mr Sinha has a Health Insurance policy for Rs. 3 lakhs Sum Insured. Assuming his policy offers a No-Claim Bonus of 5% per claim-free year subject to a maximum of 25%, the year-wise Sum Insured, No-Claim Bonus and Limit of Coverage will be as shown in the table below (on the assumption, there is no change in the Sum Insured year-on-year): 

Claim-free yearsSum Insured (Rs.)Cumulative Bonus (Rs.)Limit  of Coverage (Rs.)
After 1 year3,00,00015,000 (5%)3,15,000
After 2 years3,00,00030,000 (10%)3,30,000
After 3 years3,00,00045,000 (15%)3,45,000
After 4 years3,00,00060,000 (20%)3,60,000
After 5 years3,00,00075,000 (25%)3,75,000

The formula for the calculation of No-Claim Bonus and the rules for the utilisation of the same vary from policy to policy.

In some policies, if there is a claim, the Bonus which has already accrued is reduced by one stage in the next policy period, whether the Bonus has been utilised for the purpose of the claim or not.

However, in the recently introduced policies of Star Health, such as Star Women’s Care Insurance Policy and Star Health Assure Insurance Policy, a vastly improved formula of No-Claim Bonus has been introduced. Under these policies, the Bonus is reduced only to the extent utilised for the purpose of the claim and the balance, if any, is carried forward. Of course, no further Bonus will accrue in the next policy period, in view of the claim preferred.

For subsequent claim-free years, the policyholder will start earning the No-Claim Bonus once again till it reaches the maximum permissible percentage, which varies from 50% to 100% of the Sum Insured, depending on the type of policy.

Irrespective of the type of policy, the Bonus is always calculated as a percentage of the Sum Insured under the previous policy year, which was claim-free. If  the Sum Insured is reduced at renewal, the Bonus shall in no case exceed 100% of the reduced Sum Insured, even though the amount of Bonus already earned may be higher.

What is the benefit of No-Claim Bonus? 

As mentioned earlier, with every claim-free year, the limit of coverage will increase without any additional Premium. This is beneficial, especially during current times when medical inflation is high, and hospital expenses are skyrocketing. Depending on the type of policy, the benefit can be as high as 50% or 100% of the Sum Insured, which can be used by the policyholder for a single or multiple claims during the policy period. Thus, the benefit provides additional financial safety and security at no extra cost.

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