Health insurance: Here's how you can crack the no-claim bonus code

While an insurance company puts forth several terms and conditions to ensure a bare minimum risk, it also tends to compensate and reward policyholders in its own way. One such reward presented by health insurance companies is a Non Claim Bonus (NCB). It is a remunerative benefit provided to the customer for ensuring a claim-free year. In fact, NCB plays a pivotal role for many policyholders when they compare various health insurance plans at their disposal. If you’re a first-time insurance buyer or less informed about the concept of NCB, let’s discuss what this means for you and the insurer. 

“A no-claim bonus is a fantastic benefit that a health insurance policyholder can enjoy. In health insurance, a no-claim bonus is primarily the money added to the sum insured for each year without a claim. It is similar to a reward given to a policyholder for not filing a claim on his health insurance,” said Amit Chhabra, head – health insurance at Policybazaar.com.

Cumulative benefit vs discount on premium

Terming a no-claim bonus as the most straightforward way for an insurance company to reward its policyholder for a claim-free year, Chhabra said: “The bonus offered by the insurer is cumulative in nature, increasing with each claim-free year. In the case of health insurance, the offered bonus can be in the form of a discount on the subsequent policy premium.”

In a regular health insurance policy, NCB works in two kinds of ways — cumulative benefit and discount on premium.

Cumulative benefit

If a policyholder manages a claim-free year, the sum assured increases but the payable premium remains the same. For example, for a health insurance cover of Rs 10 lakh, your insurer offers NCB of 5% for every claim-free year.

Now, if no claim is filed in the first year of the policy, the sum assured increases up to Rs 10.25 lakh. Meanwhile, your premium rate remains unchanged. Even if you don’t file any claim for three consecutive years, the coverage amount of the policy will increase accordingly.

Discount on premium

To simply reverse the above situation, under this option the premium rate of the policy will decrease by a certain percentage for every claim-free year. However, the sum assured remains unchanged. So, if your insurer offers an NCB of 5% against health insurance worth Rs 10 lakh and a premium of Rs 10,000 every year, you may end up paying only Rs 9,500 at the time of policy renewal for a no-claim year.

Individual and floater policy

Individual and floater health policies are both eligible for the no-claim bonus. Individual health plans are policies that only cover the policyholder, whereas floater policies cover the entire family.

“If you have an individual policy and do not make any health insurance claims throughout the year, you will receive a no claim bonus. Similarly, in the case of a floater policy, if no member covered by it makes any health insurance claims for the entire year, they receive no claim bonus the following year,” said Chhabra.

What you should know

The NCB bonus is subject to the terms and conditions of each insurer. While some insurers may allow you to increase your sum insured, others may offer a premium discount or a discount on wellness products and services. When purchasing a health insurance plan, make sure to ask the insurer about the NCB benefits.

“Previously, most health policies allowed for the enhancement of the sum insured through no-claim bonus up to a certain limit, i.e. a maximum of 50%. However, there are now health insurance plans on the market that allow you to increase your insured sum by up to 200%. For the time being, this exclusive feature of a 200% increase in sum insured through NCB is only available in the Care Plus plan from Care Health Insurance,” Chhabra concluded.

It is important to read and re-read the policy documents in detail before buying a policy. Nonetheless, with medical costs mushrooming like never before, one should try and make the most out of the tiniest of benefits available. These minor discounts can actually add up to make a huge difference when you look at them holistically.