Pollution, climate change, and unhealthy dietary habits contribute to deteriorating health, leading many people to turn to health insurance for financial protection against health issues. However, as you age and face various health concerns, the need for higher health insurance coverage—and higher out-of-pocket costs—also rises. But what if you could increase your policy coverage every year without increasing your budget? Enter the concept of a no-claim bonus in health insurance.
What is a No-Claim Bonus?
A no-claim bonus is a benefit you receive from your insurer for spending a claim-free year during your policy period.
- Cumulative Bonus
- The sum insured of the base plan is increased by a fixed percentage for every claim-free year. The maximum cumulative bonus varies with the insurer and can range between 50% and 100% for five consecutive policy years without any claims.
- The increased sum insured does not come with an increased premium. Example:
Suppose you have a standard health policy with ₹20 lakh coverage. If the insurer increases the sum insured by 10% for each claim-free year, and you don’t make any claims for five consecutive years, your coverage would increase as follows: Policy Period Amount Increased Total Sum Insured 1st year NA ₹20 lakh 2nd year ₹2 lakh ₹22 lakh (for the first claim-free year) 3rd year ₹2 lakh ₹24 lakh (for two consecutive claim-free years) 4th year ₹2 lakh ₹26 lakh (for three consecutive claim-free years) 5th year ₹2 lakh ₹28 lakh (for four consecutive claim-free years)
- Discount on Premium
- For each claim-free year, the insurer reduces your policy premium at the time of renewal. For example, if you pay ₹8,000 per month for ₹20 lakh health coverage and receive a 10% NCB for every claim-free year, your premium will reduce to ₹7,200 after one year without claims. After five consecutive claim-free years, your premium would be ₹4,000 (50% of the initial premium).
Also read: How to Claim Car Insurance After an Accident or Natural Disaster? Know Full Details Here!
Benefits of No-Claim Bonus
- Pocket-Friendly Premiums
- A no-claim bonus allows you to obtain comprehensive medical coverage at a lower cost. To benefit from lower premiums, it’s advisable to avoid filing minor claims for seasonal illnesses.
- Better Financial Protection
- As you age, the risk of contracting age-related illnesses increases. The coverage you chose a few years back might not be sufficient today. With a cumulative bonus, you can get increased coverage without paying an additional premium, and the insurer doesn’t require a medical screening to increase the coverage.
- Applicability
- The no-claim bonus applies to both family floater plans and individual health insurance in the same way.
Can You Retain a No-Claim Bonus After Filing a Claim?
Many insurers offer a no-claim bonus protection rider, which allows you to retain your cumulative benefits or premium discounts even if you file claims. This rider is available for an additional premium and is more suitable for those with medical conditions requiring frequent hospitalizations, medical screenings, or doctor visits.
Points to Remember
When comparing health insurance products or providers, consider the following factors in addition to the no-claim bonus:
- Claim Settlement Ratio
- This metric shows the percentage of claims the insurer settled out of the total received in a financial year. If the ratio is less than 90%, it may indicate issues.
- Network Hospitals
- Check the list of hospitals empanelled with the insurance provider. If reputable hospitals in your city are not listed, consider skipping that insurer.
- Coverage and Exclusions
- Review the list of diseases covered under different plans and read the policy wording to understand the claim process and exclusions.
A no-claim bonus in health insurance offers the dual advantages of increasing policy coverage without raising premiums and reducing costs through premium discounts, thereby enhancing financial protection against rising medical expenses over time.