Understanding Cumulative Bonus in Health Insurance Policies

Understanding Cumulative Bonus in Health Insurance

“A ‘no claim bonus‘ or ‘cumulative bonus’ is a benefit provided by insurance providers to policyholders who do not file any claims throughout the policy year. This reward is extended in the next coverage year without increasing the premium.

In other words, this benefit is carried over to the next year in the form of an increase in the limit of coverage (basic Sum insured + cumulative bonus) without any additional cost to the policyholder. It is a reward for not utilizing the insurance coverage provided.”

However, it’s important to note that not all health insurance plans offer cumulative bonuses and those that may have different terms and conditions, such as the rate of bonus increase or the length of time required to remain claim-free before the bonus kicks in.

It’s also important to read the fine print of your policy and understand the terms and conditions so you can take full advantage of the cumulative bonus.

In conclusion, the cumulative bonus is a fantastic feature provided by health insurance a company that rewards policyholders for staying claim-free and can increase the value of their coverage over time. It is essential to check if your plan has this feature and understand its terms and conditions.

To learn more details about health insurance policies and to buy policies at an affordable premium with good discounts, visit the official website of Star Health Insurance.
 

What is a Cumulative bonus?

A cumulative bonus in health insurance refers to a reward provided to policyholders for not making any claims during a policy year. It's necessarily an increase in the sum insured (coverage amount) for every claim-free year, without a corresponding premium increase.   

Factors Affecting Cumulative Bonus in Health Insurance

Many factors impact the cumulative bonus in health insurance. Here are the key factors that affect the cumulative bonus in health insurance.

1. Claim History

If you make a claim during the policy year, the cumulative bonus might be lowered or reset to zero, based on the insurer’s terms. A few policies permit partial retention of the bonus even after making a claim.

2. Policy Renewal on Time

If you fail to renew your health insurance policy on time, you might lose your accumulated bonus. A few insurers offer a grace period (e.g., 30 days), but any lapse beyond this time period can lead to a loss of cumulative bonus. But any health insurance providers give the option to reset the bonus if they are not able to reach the maximum limit.

3. Maximum Limit (Capping)

Many insurers round off the cumulative bonus at 50%-100% of the original sum insured. Once you attain the maximum limit, no further bonus is provided, even if you continue having claim-free years.

4. Type of Cumulative Bonus

As mentioned, a few insurers provide cumulative bonuses either as discounts on premiums or an increased sum insured. The impact of claims and policy terms differs depending on the type of bonus provided in the health insurance policy.

5. Portability

If you switch health insurance providers, the new insurer might not transfer your cumulative bonus or might provide only partial credit. It’s important to check portability advantages before switching.

6. Policy Terms Changes

Insurers might revise bonus terms at renewal, so it’s significant to read policy updates. A few insurers might even modify the bonus percentage or claim impact at the time of the policy upgrades.  

Benefits of Cumulative Bonus

There are many benefits of a cumulative bonus. Here are the benefits of a cumulative bonus.

1. Motivates a Healthy Lifestyle

Cumulative bonuses make it rewarding to not make smaller claims. For this reason, only policyholders often get motivated to pursue a healthier lifestyle. Getting well-being and preventive care not only safeguards you from incurring medical expenses but also helps enhance your overall life quality.

2. Higher Coverage without Extra Cost 

The main advantage of a cumulative bonus reward is that you will get a higher sum insured at no extra cost. This means that you will get to derive more value out of your health insurance coverage at the original premium cost even at the policy renewal time.

3. Financial Security for Future Medical Needs

With the rising healthcare costs, having a higher sum insured at an affordable premium makes unexpected situations manageable and offers better financial security. More claim-free years means that it is a higher coverage amount. Better insurance coverage ensures your preparedness for future uncertainties.

4. Advantageous for Senior Citizens

Senior citizens are likely to get an advantage from accumulating cumulative bonuses, as they have a high risk of hospitalisation and critical illnesses. They can make use of an increased sum insured in a medical or health care emergency. 

5. Long-Term Savings

By maintaining a claim-free record and getting cumulative bonuses, you can have savings on extra top-ups or policy upgrades that you might otherwise require.

6. Useful for Family Floaters

In general, the family floater plans lack enough insurance coverage or have a higher premium. So, if you buy a family floater plan, the cumulative bonus will get accumulated since no family member makes a claim for a minimum of 2-3 consecutive years. Then, you and your family can get the enough insurance coverage amount eventually. For this reason only, a cumulative bonus is more advantageous for family floater policies.

Why is a Cumulative bonus needed?

A cumulative bonus in health insurance is required to reward policyholders for remaining claim-free for a policy year. This bonus generally increases the sum insured, offering greater financial security without an increase in premium. It also induces policyholders to maintain a healthy lifestyle and avoid unnecessary claims, ultimately providing a benefit to both the individual and the insurer.  

When is a Cumulative bonus required?

A cumulative bonus in health insurance is applied during policy renewal time, provided the insurance policyholder has not made any claims during the previous policy year. It necessarily rewards health insurance policyholders for staying healthy and not using their health insurance coverage. This bonus is usually included in the sum insured, thus increasing the insurance coverage amount without increasing the premium.     

What is the difference between a cumulative and a no-claim bonus?

In health insurance, a cumulative bonus increases your sum insured for each claim-free year; meanwhile, no-claim bonus (NCB) refers to a discount on your renewal premium for claim-free years. In general, a cumulative bonus increases your health insurance coverage; meanwhile, an NCB lowers your cost.

In a cumulative bonus, for each year you don't make a claim, your health insurance policy's sum insured is increased by some percentage or fixed amount. In a No Claim bonus, the total sum insured of your policy typically remains the same.  

How to check for the cumulative bonus needed for the health insurance plan?

To check for the cumulative bonus in your health insurance plan, you must refer to your health insurance policy document. The bonus amount or percentage is generally mentioned there, along with the terms and conditions for its application. You can contact your health insurance provider directly for better clarification.

1. Policy Document 

• Look at your policy document, which outlines all the information of your coverage, including the cumulative bonus.
• See for sections associated with the "Cumulative Bonus", "No-Claim Bonus", or other similar terms.
• The document will mention the percentage increase in your sum insured for every claim-free year. 
   

2. Health Insurance Provider

• If you are unable to find out the details in your health insurance policy document, then you can contact your health insurance provider directly.
• They can offer you the particular information of your cumulative bonus and how it applies to your health insurance plan.
   

3. Understand the Bonus

• Cumulative bonus is generally provided as a percentage increase in the sum insured for every claim-free year.    
• For example, if you have a sum insured of ₹5 lakhs and your health insurance policy provides a 10% cumulative bonus, your insurance coverage will increase by ₹50,000 for every claim-free year.
• There might be a limit on how much the cumulative bonus can increase your health insurance coverage.
   

4. Significance of Claim-Free Years

• The cumulative bonus is directly related to the number of claim-free years you have in your health insurance policy.
• If you make a claim in a policy year, the bonus might be lowered or reset, based on the terms of your health insurance policy.
• It's important to understand how your insurance policy manages claims and their impact on the cumulative bonus.