No-Claim Bonus: Importance of NCB in health insurance | The Financial Express

No-Claim Bonus: Importance of NCB in health insurance

There are two primary kinds of No-Claim Bonuses that you can take advantage of in a health insurance policy.

No-Claim Bonus: Importance of NCB in health insurance
Most insurers in India provide NCB benefits on health insurance products. However, the terms and conditions of each insurer affect the amount of cumulative bonus or discount on the premium.

Among the most beneficial features of health insurance is the no-claim bonus. In today’s day and age, no-claim bonus has emerged as a prime highlight that policyholders receive with their health insurance plans. The No-Claim Bonus or NCB in health insurance is a reward that the insured person receives for having a claim-free year. The reward is mostly in monetary form and this amount is added to the sum insured at the end of each policy year. In this article, we will look at the NCB in health insurance and its kinds.

The No-Claim Bonus is a way to further supplement the financial security provided by a health insurance policy. It’s also a way by which insurers encourage good health among their customers. This benefit not only promotes a healthy lifestyle but also drives customers to file a claim in times of urgent need.

There are two primary kinds of No-Claim Bonuses that you can take advantage of in a health insurance policy:

a) Cumulative Benefit

The Cumulative Benefit is offered to a policyholder as an increase in the sum insured for keeping healthy in a policy year and not filing any claims in that year. The provided benefit here is that the policy’s sum insured is increased by a certain percentage, at the time of policy renewal. If you go for a cumulative discount, the sum insured increases by 5% to 50%, depending on the coverage. Please note that the rise in the sum insured can be availed up to a given maximum limit.

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b) Discounted Premium

Another way of offering the no-claim bonus is through discounts on premiums. Although different insurers offer varying discounts on premiums, this option usually reduces the rate of premium in a policy by a given percentage for every claim-free year. In the case of a discounted premium, the sum insured remains constant throughout the tenure of the policy. A discount of 5-10% is given on renewal premiums.

Most insurers in India provide NCB benefits on health insurance products. However, the terms and conditions of each insurer affect the amount of cumulative bonus or discount on the premium. Usually, insurance companies have a set limit for the maximum amount offered as a cumulative bonus. However, mostly all insurers offer a significant increase in the sum insured for each claim-free year.

How does NCB work in health insurance?

Let’s assume that you have a health insurance plan with a sum insured of Rs 5 lakh. The cumulative benefit offered by your insurer for every claim-free year is 5%. This percentage may go up to a maximum of 50%. In this case, the total sum insured available for you after each claim-free year would be:

  • Sum insured after 1st claim-free year: Rs. 5,25,000
  • Sum insured after 2nd claim-free year: Rs. 5,50,000
  • Sum inured after 3rd claim-free year: Rs. 5,75,000

Now, since the limit of NCB to be provided by your insurer is set at 50%, your total available sum insured becomes Rs 7.5 lakh. So the No-Claim bonus allows you to have extensive coverage with an increased sum insured amount each year. Moreover, NCB comes with the option of portability. This means that if you plan to port your health insurance policy, then your NCB can be carried forward to another insurer. So, if you are planning on claiming your health insurance policy, be sure to consider the benefits of the no-claim bonus.

(By Venkatesh Naidu, CEO, Bajaj Capital Insurance Broking Ltd)

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First published on: 04-12-2022 at 10:00 IST