What is a No Claim Bonus in Health Insurance? All you need to Know

When you purchase a health insurance policy, you pay the premium as per the policy terms to the insurance company. In return, if you or any other family member covered under the policy needs hospitalisation during the policy period, you raise a claim, and the insurance pays the bill. This is how a standard health insurance policy works.

However, have you wondered what happens to the sum insured or the coverage amount if you don’t raise a claim in a given policy year? In such a situation, the insurance companies may reward you with an incentive known as the No Claim Bonus or NCB.

The NCB is offered to the health insurance policyholders at the end of every year upon policy renewal, provided they do not file a single claim during the period. The NCB is essentially a reward that the policyholders receive for their loyalty towards the insurance company. NCB benefits are applicable for individual health insurance plans and family floater policies.

One of the significant features of the NCB in health insurance plans is that it is cumulative in nature. This means the reward keeps increasing after every claim-free year. Generally, the insurance companies in India offer NCB in two ways. And, as a policyholder, you may choose how you want to receive the reward.

For every claim-free year, you can avail NCB benefits and get the premium lowered for the subsequent year, or you can enhance the sum insured amount by a specific percentage. Some insurance companies also offer NCB in the form of annual subscriptions or discounts on gym membership, spa, or yoga classes.

Although your health insurance coverage may increase for every claim-free year, there is a maximum to it. This usually ranges between 50% to 100% of the original sum insured amount. Also, the terms and conditions and the percentage by which the sum insured increases every year differs from one insurance company to another.

Let us understand this with an example.

Assume that you have purchased a health insurance policy with a sum insured of Rs. 2 lakhs, and your insurance company allows a maximum of 50% increase. This means your coverage amount may increase by another Rs. 1 lakh, i.e., the sum insured may become Rs. 3 lakhs.

If your insurer offers NCB in the form of a discount on premium, your premium may reduce by a specific percentage for every claim-free year, although the coverage amount remains the same.

Let us continue with the above example. You pay a premium of Rs. 10,000 for a policy of Rs. 2 lakhs, and the insurer offers a 5% discount on the premium as NCB for every claim-free year. In this case, if you do not file for a single claim during the policy period, you may have to pay a premium of Rs. 9,500 in the subsequent year upon policy renewal.

While most health insurance companies offer NCB to the policyholders, the benefit may not apply to all plans. While buying a health insurance policy, NCB is a critical factor that you must consider as it allows you to increase the sum insured or get a discount on the premium.

 Final Word

In the purview of the rising medical inflation and cost of hospitalisation expenses, NCB is a great way to boost your health insurance cover at no additional cost. So, stay fit, avoid filing a claim and get the most out of your health insurance plan.