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

Explaining No-Claim Bonus (NCB) in Your Health Insurance Policy

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

What is No Claim Bonus in Health Insurance?

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. 

Do you know what “Super NCB in health insurance” is?

The super NCB is an accelerated version of the no-claim bonus, which you opt for by paying an additional premium.

No Claim Bonus Calculator

The no-claim bonus calculator works as a percentage increase in the sum insured for each claim-free year. For instance, if the insurer offers a 10% bonus, a Rs. 10 lakh health insurance policy becomes Rs. 11 lakh after a claim-free year.

Types of No-Claim Bonus in Health Insurance

A No-Claim Bonus (NCB) in health insurance is a reward for not filing any claims in a policy year. The incentive helps the policyholders to stay healthy and eschew small or undue claims. Additionally, no claim bonus means that it is a reward given by your insurance provider for not claiming during a policy period. This benefit is offered as a discount on your next renewal premium or as an increase in your sum insured without increasing your premium.

There are mainly two forms of claim-free bonus in medical insurance:

1 Cumulative Bonus (Increased Sum Insured):

• This is the most popular variety. For each claim-free year, the insurer raises your sum insured (the highest amount of coverage) by a predetermined percentage (say, 5% or 10%).
• The policy premium usually doesn't change, although your coverage does.
• This bonus will build over a few years, typically up to a predetermined limit (e.g., 50% or 100% of the original amount insured). This offsets medical inflation over time.

2 Premium Discount:

• Not so common in health insurance, but a few insurers provide a direct discount on your renewal premium for every no-claims year.
• In this case, your sum insured remains the same, but the cost of your insurance goes down, making it more affordable.

How does No-Claim Bonus work?

The NCB amount in health insurance is a reward provided by the insurance provider to the policyholders for each year they remain claim-free. NCB applies to both individual and family floater Health Insurance policies.

Here is an example to show how the sum insured gets enhanced for every claim-free year by way of NCB.

 
Mr Sinha has a health insurance policy of Rs. 3 lakhs. 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, claim-free 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):

The formula for the calculation of the 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 that has already accrued is reduced by one stage in the next policy period, depending on whether the bonus has been utilised for the purpose of the claim or not.

For subsequent claim-free years, the policyholder will start earning the claim-free 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. This bonus can be applied in one of two ways, either as a bonus in reduction of premium or as an increase in your sum insured for the same premium cost. 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.

Features of No Claim Bonus in Health Insurance

Here are some important features of the No Claim Bonus in health insurance:

• Offers either a discount on the renewal premium or an increase in the sum insured for each claim-free year.
• Can be accumulated over multiple claim-free years to earn a higher NCB benefit.
• Comes with a maximum limit, beyond which no further accumulation is possible.
• Applicable to both individual and family floater health insurance plans.

What is the benefit of a No-Claim Bonus?

No-claim bonus in health insurance means that a reward is provided by your insurer for not filing any claim in a policy year. As mentioned earlier, with every claim-free year, the coverage limit 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.

Take a look at some of the key benefits of No Claim Bonus for policyholders:

• Lower Premium: It minimises the cost of renewing the mediclaim policy by getting more coverage at a lower premium.
• Financial Protection: NCB in health insurance helps policyholders ensure additional financial coverage for their family during a medical emergency.
• NCB is transferable under portability: NCB is a reward offered to the policyholder for each year in which you do not make a claim on your health insurance, and therefore, is transferred in case of portability of your health policy.
• Increased Sum Insured: It increases the sum insured of the health policy for the same premium amount, thereby offering enhanced coverage during claims.
• Healthy Lifestyle: No claim bonus in insurance encourages the insured individual to stay healthy and file a claim only when it is absolutely needed.

Do All Health Insurance Plans in India Offer No Claim Bonus?

No, not every health insurance plan in India offers a claim-free bonus. Additionally, plans that do provide this offer come with their own terms and conditions. Therefore, it is essential to read the policy documents while purchasing the plan to know whether it offers NCB in health insurance. Also, make sure to clearly understand the terms and conditions of the policy related to NCB.

Factors to Consider When Relying on No Claim Bonus:

Before relying heavily on your NCB, you should consider the following factors:

• Cap on Sum Insured: Understand the maximum limit up to which your sum can increase.
• Policy Porting: When switching insurers, check if your bonus can be carried over.
• Plan Terms: Different insurers have different rules. Check the policy document thoroughly.
• Claim Resets: A claim could reset your NCB to zero in some cases.

How can I check my no-claim bonus in health insurance?

You can check your no-claim bonus in health insurance on your policy document or by contacting the customer care of your insurance company.

Conclusion

If you are wondering what your health insurance offers apart from hospital cover, NCB is one of the key features to explore. It not only rewards you for staying healthy but also helps you get more value from your healthcare plan. It is a small feature with big long-term benefits.