What Is Cumulative Bonus In Health Insurance?

What Is Cumulative Bonus In Health Insurance?


Health insurance is vital in financial planning and provides a safety net for unexpected medical expenses. However, many people wonder whether their investment in health insurance is worth it if they don’t make any claims during a policy term. Fortunately, health insurance companies have devised a solution to this concern – the Cumulative Bonus (CB), often also called No Claim Bonus (NCB) in health insurance. Here, we will delve into the world of cumulative bonuses in health insurance, exploring what they entail, their role in your policy, the advantages they offer and how they differ from the no-claim bonus in motor insurance. By the end, you will have a thorough understanding of how a cumulative bonus can amplify the benefits of your health insurance coverage.

Understanding the Cumulative Bonus in Health Insurance

A cumulative bonus, commonly known as No Claim Bonus, is a reward system implemented by health insurance providers to appreciate and motivate policyholders who maintain a claim-free record over a specified period. This bonus serves as an incentive for policyholders to prioritise their health and preventive healthcare practices.

The primary offerings under cumulative bonus typically include a discount on the policy premium. It may also increase the sum insured for the upcoming policy term. However, it’s crucial to note that these rewards have an upper limit defined by the insurance company.

How Cumulative Bonus Works: Understanding with a Practical Example

To gain a better understanding of the concept of cumulative bonus, let’s delve into a practical example:

Imagine Mr Vijay, who initially purchases a health insurance plan with coverage for Rs 5 lakh. As he progresses through consecutive claim-free periods, his insurer rewards him with a cumulative bonus, equivalent to 50% of his original sum insured amount.

After completing the first claim-free cycle, Mr Vijay becomes entitled to an increase in his coverage by Rs 2.5 lakh. This means his total coverage will be Rs 7.5 lakh in the subsequent cycle.

Following this consistent pattern, he will become eligible for an additional increment of Rs 2.5 lakh after completing another claim-free policy cycle. This will elevate his overall coverage to Rs 10 lakh. At this juncture, the cumulative increments he has received (now totalling Rs 5 lakh) will equal his initial sum insured amount. Consequently, he will not qualify for further increases in the subsequent cycle.

If Mr Vijay were to claim this point, he would forfeit the bonus accrued from the previous cycle in the upcoming cycle. However, there are also a few insurance providers who do not roll back their sum insured to the original amount in case of a claim.

Role of Cumulative Bonus in Health Insurance

The cumulative bonus plays a pivotal role in health insurance by motivating policyholders to take their health and wellness seriously. Its primary functions include —

  • Reward for Claim-Free Years: It is a tangible reward for policyholders who stay claim-free throughout a specific policy term.
  • Encouragement for Preventive Care:The cumulative bonus encourages policyholders to prioritise preventive healthcare practices, thus helping them avoid unnecessary medical expenses.
  • Financial Incentive: It offers a financial incentive by lowering the policy premium or increasing the sum insured, providing tangible benefits to policyholders.
  • Accumulation over Time: Cumulative bonus allows policyholders to accumulate the no claim bonuses for every year they do not claim their health insurance, until100% increase in the SI. Thus gradually enhancing their coverage.
  • Protection Against Inflation: The increase in the sum insured through cumulative bonuses helps policyholders keep up with rising healthcare costs due to inflation.

However, it’s essential to understand that most insurance firms have a rule that if a policyholder claims to receive one or more cumulative bonuses, he/she will lose the increment gained from the previous term’s cumulative bonus.

Benefits of Cumulative Bonus in Health Insurance

Cumulative bonus in health insurance offers a multitude of benefits to policyholders, making it a valuable component of their coverage. Let’s look at the advantages —

  • Reward for Good Health: Perhaps the most significant benefit is that the cumulative bonus rewards policyholders for maintaining good health and not raising claims during the policy term.
  • Cost Savings: Policyholders can enjoy reduced policy premiums or increased coverage due to the cumulative bonus, allowing them to save money on their health insurance.
  • Accumulation Over Time: The accumulated bonus can cover small medical expenses or unforeseen health-related costs, providing a safety net for policyholders.
  • Flexibility: Policyholders can utilise their cumulative bonus for various purposes, adding a layer of financial security to their healthcare journey.
  • Incentive for Preventive Care:A cumulative bonus is a powerful motivator for policyholders to focus on preventive care, leading to better overall health outcomes.
  • Protection Against Inflation: An increase in the sum insured through cumulative bonuses helps policyholders stay adequately covered despite rising healthcare costs due to inflation.
  • Applicable to Individual and Floater Plans: Cumulative bonus applies to individual and family health insurance Hence, it is accessible to a wide range of policyholders.
  • Protection Against Inflation: With healthcare costs subject to periodic inflation, an increase in the sum insured provided by cumulative bonuses aids policyholders in keeping up with rising expenses.
  • Long-Term Accumulation: Policyholders can accumulate their cumulative bonus over a specified number of policy years, potentially increasing their sum insured by 100%.

Cumulative Bonus vs. No Claim Bonus: Understanding the Difference

In the insurance domain, the terms cumulative bonus and no claim bonus sometimes get used interchangeably, but they have subtle distinctions.

In health insurance, a cumulative bonus can encompass a premium discount or an increase in the sum insured, depending on the insurer’s terms and conditions. It’s a versatile reward system that provides tangible benefits to policyholders.

On the other hand, no claim bonus in motor insurance typically refers only to a discount on the policy premium. It serves as a reward for safe driving and maintaining a claim-free record, encouraging responsible behaviour on the road.

The cumulative bonus remains unaffected by regular health check-ups. Policyholders can avail of these check-ups without worrying about losing their bonus.

Conclusion: Leveraging Cumulative Bonus

Health insurance is not just about safeguarding your well-being; it’s also an opportunity to unlock additional benefits like cumulative bonuses. This bonus is a tangible reward for policyholders prioritising their health and maintaining a claim-free status during their policy term. It’s a smart financial move that ensures your physical well-being and contributes to your financial health.Moreover, in today’s digital age, tools like a health insurance premium calculator can help you make informed decisions about your insurance coverage. These calculators allow you to estimate premiums based on your needs, helping you find the right plan that aligns with your budget.


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