No Claim Bonus (NCB): Benefits and Applicability of NCB
A No Claim Bonus or NCB is essentially an incentive or discount offered by insurance companies to policyholders for not raising any claim in a given period. Additionally, insurers may offer this incentive to policyholders for their loyalty. At times paying out this reward is much cheaper than the claim amount which may run into lakhs. Collectively, such a feature allows policyholders to bear medical inflation with greater ease and makes premium payment and policy renewal manageable. Regardless, to maximize accompanying benefits, individuals should check some details, including the working of NCB or No Claim Bonus in health insurance, its types, benefits, and more.
Types Of No Claim Bonus Under Health Insurance
Majorly, insurance providers offer two kinds of NCB or a No Claim Bonus on a member’s health insurance policy. They are as follows:
1. Cumulative benefit
Insurers increase the policy’s coverage amount by keeping the premium amount constant under this benefit. Therefore, for a claim-free year, policy holders can avail themselves of this benefit.
For instance, consider buying a health insurance plan of Rs. 10 lakh from an insurer that offers an NCB health insurance of 5% for every non-claim year. Hence, if you do not raise a claim for one year, your coverage amount will be Rs. 10.5 lakh.
However, the premium amount will remain unchanged. The same calculation applies to consecutive non-claim years. Therefore, if you get hospitalised at the end of the first non-claim year, you can raise a claim of up to Rs. 10.5 lakh.
As the name suggests, under this benefit, one can enjoy a reduction in the premium rate of a policy by a certain percentage for every claim-free year. Nevertheless, the coverage amount remains unchanged.
Take a look at an example to understand this benefit clearly. Suppose, for a health insurance coverage of Rs. 7 lakh, a member has to pay a premium of Rs. 15,000 annually. Now, if the insurance provider assigns a 10% discount on the premium amount as a no claim bonus in health insurance, then during policy renewal time, one needs to pay a premium of Rs. 13,500.
However, the coverage amount does not change. Moreover, the amount of cumulative benefit or discount varies across insurance providers. Therefore, one should go through the details of this bonus before settling for an insurer.
3. Working of a No Claim Bonus in Health Insurance
The working of an NCB for health insurance depends on the type of bonus offered by insurers. For instance, a cumulative benefit no claim bonus varies from 5% to 50%, depending on an insurance provider.
Also, with cumulative NCB, you can get maximum coverage with an increased sum insured each year. Furthermore, this NCB accumulated for every non-claim year is transferable to another policy from the same or different insurer.
Similarly, for discounts on the premium type of NCB, one can enjoy coverage at a discounted rate.
Also Read: 7 Questions To Ask Before Getting A Health Insurance
No Claim Bonus Add-on Cover in Health Insurance
One can pay an additional price for add-ons, which are extra benefits.
Moreover, if the insured person makes no claim in the previous year, the no-claim bonus add-on increases the bonus percentage at the time of the renewal.
Sample Illustration of a No Claim Bonus in Health Insurance
When it comes to a no claim bonus that a person does not claim in a year, the renewal premium rate decreases by a specific percentage.
But one should note that the sum insured by the policy does not change.
The example given below illustrates this further:
Mr. Vinay Kumar bought a health insurance policy. The coverage amount is Rs. 6 lakh. Mr. Kumar has to pay a premium of Rs. 12,000 annually. The insurance company offers a discount of 5% on the renewal premium amount as a no-claim bonus. This discount is applicable on the premium amount.
Vinay Kumar made no claims in 2019. So the next year, he had to pay Rs. 11,400 as premium. But the sum insured did not change.
Also Read: Renewal Of Health Insurance: Benefits And Points To Consider
Benefits of A No Claim Bonus in Health Insurance Policy
Check out the advantages of no claim bonuses in a health insurance plan.
1. Boost your savings
The bonus received on your health insurance policy can be from discounts on premiums paid or accumulated coverage that increases the sum insured every year. In either case, you have a chance of saving more and securing finances better.
2. Increased sum insured
Members can also increase the cumulative benefit of a no claim bonus in a health insurance policy by paying less hefty hospital bills out of their pockets and not raising a claim. In this way, they can increase their sum insured for every non-claim year.
3. Applicable to both individual and family floater plans
Policyholders and their families can obtain no claim bonus irrespective of their health insurance plans for every claim-free year. Therefore, this benefit is extended to both individual and family floater health insurance policyholders.
4. Available as an add-on cover in a health insurance policy
Some insurers offer an add-on for NCB that increases the bonus amount at the time of policy renewal if the member does not raise a claim for a year.
However, to avail of these additional benefits, one needs to pay an increased premium on their health insurance policy.
5. Portability
The no-claim bonus in health insurance is transferable to other insurance companies. Thus, the accumulated bonus stays active when you shift to another insurance provider.
In case you want to change your existing health insurance policy provider, you can switch to Navi Health Insurance and get your accumulated bonuses transferred accordingly. Also, you can get one-time subscription-based model health policies from this insurance provider.
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Applicability of a No Claim Bonus to All Types of Health Insurance Policies
It has been seen that in many cases, health insurance policyholders do not need to make claims every year. This is because, many times, the bills are affordable and paid by the patients.
The no claim bonus limit for health insurance policies is set at 50%. No claim bonus enables maximum coverage. Additionally, it ensures an increased sum insured every year.
Example:
Suppose Mr. Amar Nath has no claim for health insurance. The sum insured is Rs. 5 lakh. Suppose the insurance provider offers a 5% cumulative no claim bonus for every claim-free year.
Therefore, the total sum insured for every claim free year would be as follows:
Sum insured after first claim-free year: Rs. 5 lakh 25 thousand
Sum insured after second claim-free year: Rs. 5 lakh 50 thousand
Sum insured after third claim-free year: Rs. 5 lakh 75 thousand
The insurer provides a no-claim bonus up to 50%. It is the maximum limit. Therefore, the amount of the total sum insured would increase to Rs. 7.5 lakh.
As illustrated above, no claim bonuses increase the coverage amount of a health insurance policy.
Important Things About No Claim Bonus in Health Insurance One Must Know
The crucial points that you should keep in mind about NCBs or No Claim Bonuses in health insurance policies are enumerated below:
- No claim bonuses are applicable for both individual and family floater health insurance policies.
- One should minutely read the terms and conditions of the no claim bonus medical policy because it tends to vary from one insurer to another.
- It is important to keep in mind that not all medical insurance plans come with a no claim bonus.
- Importantly, there is a limit on the benefits that one will receive, i.e, the increased amount will not go up after a specified limit or the premium will not reduce after a specified amount.
Limitations Associated With A No Claim Bonus in Health Insurance Policies
The crucial disadvantages of a no claim bonus health insurance policy are detailed below:
- If the policyholder makes a claim in a particular year, then the sum insured will reduce at the specified rate.
- One should remember that NCBs will not be applicable for many health insurance benefits like second medical opinion, vaccination expenses and maternity expenses.
Also Read: Understanding Health Insurance Claim Settlement Ratio In India
Final Word
It is crucial to note that not all insurance providers offer an NCB on your health insurance policy. Therefore, you should go through the policy terms and conditions before signing up for an insurance plan. A no claim bonus in health insurance appreciably decreases the burden of medical expenses one may face at times of unforeseen situations. In addition, it is a lucrative way to enhance your insurance coverage benefits that secure you and your family financially during medical emergencies.
FAQs
Ans: No, the no claim bonus will not get lost if you switch your health insurance policy. All that you need to do is ensure that you renew the policy in time when you change insurers.
Ans: If one does not renew their policy then, the no claim bonus will expire.
Ans: If one makes no claim in a year, he/she receives a no claim bonus the next year. NCBs can be increased if a person does not need to make any claim in subsequent years. Insurance companies set a limit for a no claim bonus. The discount that the policyholder will receive in a given year or the increase in the sum insured will depend on the specified limit.
Ans: Yes, you need to renew your health insurance policy to get no claim bonus or NCB. Failing to do so will deactivate your plan, and the accumulated NCB will be lost.
Ans: You can get an additional no claim bonus cover on your health plan by paying more premium and increasing the incentive amount.
Ans: Both cumulative and discounts on premiums are beneficial. However, some prefer cumulative benefit to get a higher sum insured every year, whereas a discount on a premium rate is a better option for others. Therefore, it is difficult to say which type of NCB is better.
Ans: Yes, generally, insurers ask for proof of NCB within a week of giving a quote. In case you fail to furnish proof, your policy might get cancelled.
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Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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