What is Cumulative Bonus in Health Insurance and Why You Should Know

Health insurance has become a quintessential need in today’s era. So, what is health insurance ? A health insurance plan is a renewable contract with which, an individual can protect their loved ones from a medical crisis. Cumulative Bonus (CB) is offered to the policyholders to ensure that they receive some more added benefits for not filing a claim. Before customers buy health insurance, it is essential to know everything about the cumulative bonus in health insurance. Therefore, go through the following guide to understand the concept & how does it work in helping you receive benefits in the long run:

What is a Cumulative Bonus in Health Insurance?

A Cumulative Bonus is a feature provided by every insurance company on availing a health insurance policy. It is a rewarding benefit offered to those policyholders who don’t file a claim for their health insurance policy. While certain insurers add the benefit to the sum assured amount, the rest of them offer rebates when a customer renews health insurance. Although the type of cumulative bonus may differ, the granted benefits on every claim-free year remain the same.

Types of Cumulative Bonus in Health Insurance

1. Bonus Based on Percentage of Sum Insured

This is the most common type of cumulative bonus. In this structure, the bonus is calculated as a percentage of the sum insured. For example, if you have a sum insured of ?5 lakh and the bonus is 10%, your sum insured will increase by ?50,000 after a claim-free year. The bonus typically increases each year you remain claim-free.

2. Bonus Based on Fixed Amount

In this case, the insurer offers a fixed sum (say ?25,000, ?50,000, etc.) as a bonus, regardless of the original sum insured. This can be beneficial if you want a specific increment to your coverage without worrying about percentage-based increases. This type is less common but still found in some policies.

3. Bonus on Renewal

Some health insurance policies apply a cumulative bonus at the time of policy renewal. The bonus is added to the sum insured for the new policy year, provided the policyholder has not made any claims during the previous year. This bonus is typically applied after every renewal.

4. Bonus that Reduces After a Claim

In certain health insurance policies, if a claim is made, the cumulative bonus can be reduced. For example, after a claim, the bonus may be halved or reset to zero for the following year. However, some insurers might allow the bonus to continue at a reduced rate.

5. Bonus for Family Floater Policies

In a family floater policy, the cumulative bonus is applied to the entire family’s coverage. If no claims are made by any member of the family, the cumulative bonus can be shared and added to the overall sum insured for all family members.

6. Bonus for No Claims in Multiple Years

Some insurers reward policyholders with a higher bonus if there are multiple consecutive claim-free years. For example, a policyholder who remains claim-free for two or three years might receive a higher bonus compared to someone who only remained claim-free for one year. Each insurer may have its own method of calculating and applying cumulative bonuses, so it's important to check the specifics of your health insurance policy to understand the exact benefits and conditions.

Benefits of Cumulative Bonus

The Cumulative Bonus is generally provided to a buyer only under specific situations. Given below are the conditions under which an insurer allows every policyholder to avail CB Benefits.

1. There is a significant rise in the sum assured amount that directly corresponds to the percentage of Cumulative Bonus you have accumulated over the years. The increase in the sum assured value is directly proportional to the total number of claim-free years.
2. The bonus is generally accumulated up to a maximum period of 10 years.
3. The CB is mentioned in the policy document. Hence, the policyholder must read the policy document, and its terms and conditions carefully.
4. It is applicable to the sum assured for a valid policy. Therefore, a policyholder must ensure timely insurance renewal before the expiry period or they will lose all CB benefits accrued during their policy tenure.
5. The CB on the sum assured varies from 10% to 100%.
6. If the claims overlap with two health insurance policies, then an individual can obtain the benefits of sum assured. However, the Cumulative Bonus is not zeroed down.
7. The bonus can either be withdrawn as a whole or after the deduction in the premium.

What is the Role of Cumulative Bonus in Health Insurance

Here’s a detailed explanation of the role of cumulative bonus in health insurance in bullet points:

1. Increased Coverage Over Time: A cumulative bonus increases the sum insured after every claim-free year. This means that if you don't make any claims during a policy period, the insurer will add a certain percentage to your sum insured, which enhances your coverage without raising the premium. This helps provide additional financial protection for future medical needs.
2. Reward for Claim-Free Years: The cumulative bonus serves as a reward for maintaining a healthy lifestyle and not making frequent claims. It acts as an incentive from the insurer, encouraging policyholders to be cautious about their health and avoid unnecessary medical expenses, ultimately benefiting both the insurer and the insured.
3. No Additional Premium Costs: One of the key benefits of the cumulative bonus is that you do not have to pay any extra premium for the increased sum insured. It’s a free benefit that comes with your existing policy, which makes it an attractive feature for policyholders.
4. Encourages Health Management: This bonus system motivates policyholders to take better care of their health and prevent illnesses. Since it is directly linked to the absence of claims, it rewards individuals who live a healthy lifestyle, encouraging them to avoid unnecessary hospital visits or treatments.
5. Applicable at Policy Renewal: The cumulative bonus is applicable when the policy is renewed. It reflects as an enhancement of the sum insured for the new policy term. This ensures that the policyholder’s coverage improves with time, ensuring more comprehensive protection with each renewal.

This feature allows policyholders to benefit from higher coverage while keeping premiums stable, offering both financial security and a healthy incentive.

How does Cumulative Bonus Work in a Health Insurance Policy?

Here’s an explanation of how cumulative bonus works in a health insurance policy:

1. Accumulation Over Time: The cumulative bonus in health insurance works by increasing the sum insured after each claim-free year. For example, if you don’t make any claims in a given year, the insurer adds a fixed percentage to the sum insured for the following policy term.
2. No Additional Premiums: A key feature of the cumulative bonus is that the increased coverage comes at no additional premium cost. It is a reward from the insurance provider for maintaining good health and not utilizing the policy during the year.
3. Percentage of Sum Insured: The bonus is usually a percentage of the sum insured, which increases with each year the policyholder doesn’t make a claim. For example, if the cumulative bonus is 10%, and you have a sum insured of ?5 lakh, the next year your sum insured could increase to ?5.5 lakh (?5 lakh + ?50,000).
4. Claim-Free History: The cumulative bonus applies only if no claims are made during the policy year. If you file a claim, the bonus may be reduced or not applied at all, depending on the insurer’s terms and conditions.
5. Impact on Future Claims: The cumulative bonus helps policyholders handle future medical costs by providing a higher sum insured. It acts as an added benefit, ensuring better financial protection against rising healthcare expenses without increasing the premium cost.
6. Renewal Process: At the time of policy renewal, the insurer will calculate the bonus based on your previous claim-free years and adjust the sum insured accordingly. This process encourages customers to maintain good health and be cautious in using their health insurance.

Overall, the cumulative bonus is a valuable benefit that improves coverage over time, without increasing premium payments, as long as you maintain a claim-free record.

Conclusion

To sum up, knowledge regarding the Cumulative Bonus can be quite helpful to save on your premiums in the future and as an incentive in not filing for a claim if not required. Hence, utilizing the benefits of your health plan during online policy renewal is essential. Bajaj Allianz General Insurance provides every policyholder with a hassle-free insurance purchase experience. Buy a health plan and secure yourself today!

FAQs

How do I use my cumulative bonus on my health insurance?

The cumulative bonus in health insurance increases your coverage in the form of a higher sum insured for the next policy year. You can use this bonus in case of hospitalization or medical expenses, which will reduce your out-of-pocket expenses by using the increased coverage.

Is the NCB available for add-ons?

Typically, the No Claim Bonus (NCB) does not apply to add-ons. The NCB is offered based on the base health policy, and add-on benefits like critical illness cover or hospital cash benefit may not be eligible for this bonus.

Do all health insurance plans offer a no-claim bonus (NCB)?

No, not all health insurance policies provide a No Claim Bonus (NCB). Some insurers offer this benefit, while others may not, depending on the plan. It’s essential to review the policy details before purchasing.

What happens to my cumulative bonus if my health insurance lapses?

If your health insurance policy lapses due to non-payment of premium or any other reason, you may lose the cumulative bonus accumulated during the policy term. However, some insurers may offer a grace period or allow the bonus to be reinstated upon renewal. It’s important to avoid policy lapses to retain your bonuses.