Medical Insurance

Demystifying No Claim Bonus in Medical Insurance: Mechanism, Variations & Advantages

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In today’s healthcare environment, ensuring financial stability in the face of rising medical costs is more vital than ever. A strong medical insurance plan is pivotal in safeguarding individuals and families from the financial burdens associated with healthcare expenses. Amidst the various features of medical insurance plans, the No Claim Bonus (NCB) stands out as a critical yet often underestimated aspect. 

What is No Claim Bonus in Health Insurance

In health insurance, the No Claim Bonus is a financial reward from insurers for maintaining good health and avoiding claims for a specified period, usually a year. It translates into premium discounts or increased coverage, motivating policyholders to prioritise preventive healthcare.

Types of No Claim Bonus

Health insurance No Claim Bonuses can be broadly categorised into two types – Discount on Premium and Cumulative Bonus.

Discount on Premium:

Opting for this type of No Claim Bonus results in a reduction in the premium for policy renewal by a specific percentage for each claim-free year. While the premium decreases, the sum insured remains constant.

Cumulative Bonus:

Under this category, the sum insured or coverage amount increases by a certain percentage for every claim-free year. Despite the cumulative increase in coverage, the premium amount remains unchanged.

Benefits of No Claim Bonus

Understanding the advantages of No Claim Bonus in the best health insurance plans for family is crucial for making informed decisions when selecting a policy. Some notable benefits include:

  • Reduced Policy Renewal Expense: No Claim Bonus reduces policy renewal expenses, rewarding policyholders for maintaining a claim-free record.
  • Enhanced Coverage: Policyholders can enjoy better coverage than their initial purchase, either through reduced premiums or increased sum insured.
  • Financial Savings: Policyholders can save money on premiums and accumulate funds for future medical expenses by refraining from raising claims and earning a No Claim Bonus.
  • Encourages Health Maintenance: The bonus acts as an incentive for policyholders to prioritise their health, discouraging unnecessary claims unless a significant emergency arises.
  • Improved Financial Protection: In medical emergencies, No Claim Bonus ensures better financial protection for the policyholder and their family.

How No Claim Bonus Works:

To illustrate the workings of No Claim Bonus, let’s explore examples for both Discount on Premium and Cumulative Benefits:

Discount on Premium:

Meet Priya, who has a medical insurance plan with a sum insured of ₹ 8 lakh and an annual premium of ₹ 6,000. Priya remains healthy throughout the policy year, and as a reward for her claim-free status, the insurer grants her a 15% discount on the premium during renewal. Consequently, Priya’s renewal premium is reduced to ₹ 5,100, resulting in direct savings of ₹ 900.

Here is the break of the calculation for the discount on the premium in Priya’s case:

  • Initial Premium:

Priya’s annual premium for the medical insurance plan is ₹ 6,000.

  • No Claim Bonus Discount:

The insurer offers Priya a 15% discount on the premium as a reward for her claim-free status.

Discount Amount = 15% of ₹ 6,000 = ₹ 900.

  • Renewed Premium:

The discount is subtracted from the initial premium.

  • Renewed Premium = Initial Premium – Discount Amount

Renewed Premium = ₹ 6,000 – ₹ 900 = ₹  5,100.

So, Priya’s renewal premium after the 15% discount is ₹ 5,100, resulting in direct savings of ₹ 900. This showcases how maintaining a claim-free record can lead to a reduced premium during policy renewal, providing financial benefits to the policyholder. 

Cumulative Benefit:

Arjun initially has a sum insured of ₹ 6 lakh, and his insurer offers a 12% cumulative bonus for every claim-free year. After the first year without any claims, Arjun’s sum insured increases to ₹ 6,72,000 during renewal. This cumulative benefit persists, and in the following years of maintaining a claim-free record, Arjun’s sum insured continues to rise by 12% annually. However, Arjun’s insurer has set a maximum limit of 50% on the cumulative boost.

After five consecutive claim-free years, Arjun’s sum insured reaches the maximum limit, resulting in a final sum insured of ₹ 9,00,000. It’s important to note that the cumulative benefit rewards Arjun’s commitment to a healthy lifestyle and ensures his coverage grows substantially over the years.

Here is how the cumulative bonus is calculated for each year:

Year 1:

  • Initial sum insured: ₹ 6,00,000
  • Cumulative bonus (12% of ₹ 6,00,000): ₹ 72,000
  • Renewed sum insured for the next year: ₹ 6,72,000

Year 2:

  • Initial sum insured (carried over from the previous year): ₹ 6,72,000
  • Cumulative bonus (12% of ₹ 6,72,000): ₹ 80,640
  • Renewed sum insured for the next year: ₹ 7,52,640

Year 3, 4, 5:

The same calculation pattern is followed, with the cumulative bonus for each year being 12% of the sum insured from the previous year.

Final Thoughts 

No Claim Bonus (NCB) in medical insurance plans is a vital incentive, rewarding policyholders for maintaining good health and abstaining from claims. Niva Bupa Health Insurance stands out for its family-friendly plans, emphasising the importance of NCB. 

Opting for Niva Bupa ensures comprehensive coverage and financial rewards, making it an excellent choice for those seeking medical insurance for their family.



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