What does No Claim Bonus mean in health insurance

by Kanika Shelatkar Insurance Consultant

No Claim Bonus is exceptionally essential for policyholders. In the long run, the real benefits are obtained. In India, too, there are various types of NCBs provided by health insurance firms. Read ahead to learn more about what the health insurance No Claim Bonus is, its forms, features and benefits.

The insurer is providing No Claim Bonus in health insurance plans to the policyholder based on specific terms and conditions. The critical requirement for availing No Claim Bonus is that a claim would not have been made by the policyholder during the previous policy period.

The No Claim Bonus is, in a sense, a reward for remaining health conscious and not raising a claim for the policyholder. The insurer does not mind rewarding the policyholder to guarantee loyalty to the customers. It is much more realistic for insurers to offer No Claim Bonus than to settle claims for health insurance that could run into lakhs of rupees.

Types of No Claim Bonus

No Claim Bonus is provided by all the medical insurance providers. All private and public sector insurance providers provide qualifying policyholders with No Claim Bonus. There is a difference in the NCB model offered, though.

There are two forms of No Claim Bonus that insurance firms in India offer: Cumulative Benefit and Premium Discount. Here is a brief of both NCB types.

Cumulative Benefit: There is no discount given under this form of No Claim Bonus, but there is an increase in the amount Insured. Therefore, policyholders are compensated for not increasing a claim by an increased amount insured during policy renewal.

Discount on Premium: This form of No Claim Bonus, as the name implies, provides a discount on the premium payable during policy renewal. Therefore, policyholders get a reduced rate to maintain their insurance plan.

How does it work?

The working of No Claim Benefit for health insurance depends on the form of NCB the insurance provider provides. Here's a simple brief on how to measure No Claim Bonus.

No Claim Bonus in case of Cumulative Benefit:

Mr Y does not raise a claim for his INR 5 lakh policy. While renewing the plan, his insurance provider gives him an increase in sum Insured by 10 per cent. This takes his sum insured to INR 5.5 lakh. If he does not file a claim during the next year as well, the Cumulative Benefit will again be valid and the sum insured will increase to INR 6 lakh.

With Cumulative Benefit, there might be a limit of 50 per cent. This means the added sum insured cannot go up to more than 50 per cent of the original value. In the above case, Mr Y's sum insured will rise till INR 7.5 lakh for five unceasing claim-free years, and then halt concerning the bonus benefit.

No Claim Bonus in case of Discount on Premium:

If Mr Z has a policy with a sum insured of INR 5 lakh. It had cost INR 5,000. As no claim was raised during the policy period, the insurance company gave him a discount of 10 per cent. Therefore, Mr Z had to pay INR 4,500 to recommence his plan.