Know how cumulative bonus works in Health Insurance

The benefits of Health Insurance have made it an essential investment in financial planning. Because it offers the necessary financial support during health problems, be it an emergency or planned hospitalisation. Apart from the regular coverage for diseases, illnesses and accidents, there are many other benefits that Health Insurance offers.

One such benefit is cumulative bonus, also called a no-claim bonus. The benefit of a Health Insurance policy can be availed either through cashless claims or reimbursements. Here is a question - what happens when the insured does not raise any claim during the policy period? Passing the policy year without making any claim is indeed an achievement. So, as a reward for this, many Health Insurance policies offer a cumulative bonus to the insured person who passed the policy year without making any claim.

A cumulative bonus or no-claim bonus entitles the insured to enhance their opted Sum Insured without any additional levy on the Health Insurance premium. This benefit goes for both Individual Health Insurance plans and Family Floater Health Insurance plans if the policies offer the same.

How does this feature favour you? As mentioned earlier, the cumulative bonus is offered only when no claim was made during the entire policy period. A cumulative bonus enhances the limit of the opted Sum Insured, thus entitling the insured to avail the increased Sum Insured. For every claim-free year, the Sum Insured will get enhanced by a fixed percentage until it reaches the maximum limit fixed by the policy, for example, 50% or 100% of the Sum Insured. The threshold limit of the cumulative bonus varies as provided by the terms and conditions of the policy and the insurer.

Let us suppose an insured person has a Health Insurance policy having a Sum Insured of Rs. 5 lakhs, and the policy offers 10% of the Sum Insured as a cumulative bonus for every claim-free year, for a maximum of up to 100% of the Sum Insured. This implies that if the policy year turns out to be a claim-free year, then the insured’s opted Sum Insured gets enhanced by 10%. In the following year, the insured gets a 10% increase on the Sum Insured which is Rs. 5,50,000/-, without any additional premium.

If the second year also turns out to be a claim-free year, then the Sum Insured limit will become Rs. 6 lakhs. The same pattern continues for every claim-free year until the bonus limit reaches 100% of the opted Sum Insured, which is Rs. 10 lakhs. However, the insured will not be entitled to a further increase in the Sum Insured for the following claim-free years once the cumulative bonus reaches 100% of the Sum Insured. What happens to the cumulative bonus if the insured makes a claim? In such a scenario, the insured will be entitled to the enhanced Sum Insured as a result of accumulated bonus from the previous claim-free years, and the bonus will start afresh.

The opted Sum Insured can get doubled if the cumulative bonus reaches 100% of the Sum Insured. And to keep it going till the cumulative bonus reaches 100% of the Sum Insured, renewing the policy becomes crucial. Through successive renewals, cumulative bonus and continuity benefits will remain intact. By missing the renewals, the policy will get inactive, leading to a fresh start of the cumulative bonus.

No wonder the cumulative bonus is a significant benefit because it increases the coverage limit without any additional charges on the premium. Medical bills are unforeseen, but you can gain the cumulative bonus by paying out the small medical bills out of pocket. So, you can keep the extensive coverage, which includes the Sum Insured and cumulative bonus, for later use.

Investing in Health Insurance will always be beneficial. It takes care of your medical bills through cashless or reimbursement claims and provides a cumulative bonus for not making a claim. Health Insurance benefits and secures you and your loved ones.