No-claim bonus in health insurance: how the cumulative bonus works, after a claim and when you port

What is a no-claim bonus in health insurance?

A no-claim bonus is a reward for a year without claims, usually given as extra sum insured at renewal at no extra premium. In health insurance that extra cover is called a cumulative bonus. IRDAI’s Master Circular on Health Insurance Business of 29 May 2024 (para 14) says insurers “may” offer an NCB, and that where they do, it is given at every renewal in the form the policyholder chooses or consents to:

• Cumulative bonus: an addition to the sum insured without a matching increase in premium; and/or
• Discount on the renewal premium.

So NCB and cumulative bonus are closely linked: cumulative bonus is the most common form an NCB takes. Which forms your product offers, and at what rate, is in the wording and schedule.

Rates vary widely. Many products add 10% to 50% of the base sum insured for each claim-free year, capped somewhere between 100% and 500% of the base. Some products also add a bonus every year whether or not you claim, often under a name like “plus” or “booster” benefit.

What happens to a cumulative bonus after a claim?

It depends on your wording. Some reduce the bonus after a claim year, for example at the same rate it was earned, without ever cutting into your base sum insured. Others, especially bonuses described as added “irrespective of claims”, aren’t reduced at all.

Example. You have a ₹5 lakh base sum insured and a 10% bonus a year, capped at 100%. You claim ₹1,20,000 in year 3. Wording A gives 10% per claim-free year and takes 10% off after a claim year. Wording B adds 10% every year regardless of claims.

The ₹1,20,000 claim is paid in full in both cases. Under wording A it costs ₹1,00,000 of future cover: by year 5 you have ₹6,00,000 instead of ₹7,00,000.

In floater wordings that reduce the bonus, a claim by any family member usually affects the whole family’s bonus. A claim can’t be used against you at renewal in other ways: IRDAI’s 2024 Regulations say renewal can’t be refused because you claimed, and renewal premium loadings on individual products are set for the whole portfolio, not on your own claims.

Is it worth not claiming to protect the bonus?

Do the sums before you decide. In the example, skipping the ₹1,20,000 claim under wording A would keep ₹1,00,000 of extra cover in later years, but leave you ₹1,20,000 out of pocket now. The bonus is extra cover you may never use, not cash.

Does the no-claim bonus carry over when you port?

Yes. IRDAI’s 2024 Master Circular lists the no-claim bonus among the credits that move to a new insurer when you port (para 12(d)), and to a new plan with the same insurer when you migrate (para 11). Credit is given to the extent of your existing sum insured.

How the new insurer shows the bonus, for example within the sum insured you carry over or under its own bonus structure, can differ. Ask it to confirm in writing how your accrued bonus is credited before you accept, and port before your current policy lapses. See health insurance portability for the steps.

How can you lose a no-claim bonus?

The most common ways are renewing late and changing the policy’s structure.

• Renewing after the grace period. The Master Circular protects the bonus only if you renew within the grace period: 30 days for annual, half-yearly or quarterly premiums, or 15 days for monthly instalments. After that the policy has a break, and accrued benefits can be lost.
• Lowering the sum insured. Some wordings reduce the bonus in proportion.
• Merging policies. Some wordings carry forward only the lowest bonus among members when individual policies are combined into a floater.
• Splitting a floater. Some wordings share out the bonus in proportion to each new policy’s sum insured.
• A claim, if your wording reduces the bonus after one.

When you raise the sum insured, some wordings work out the next bonus on the previous year’s sum insured, not the new one.

Does the bonus raise your room rent limit?

It depends on the wording. Some set percentage limits, such as room rent at 1% a day, on the “base sum insured”, which excludes any bonus. If your clause says “sum insured”, read that definition to see whether the bonus is included. See room rent capping for how these limits work.

The bonus is also different from a restoration benefit, which refills cover within a year after a claim and lapses at the end of it.

What to check in your policy

1. Policy schedule: the cumulative bonus currently accrued for each person, the rate per claim-free year and the maximum.
2. Policy wording: search for “cumulative bonus”, “no claim bonus” and “NCB”. Read the notes on claims, floaters, changes in sum insured and the grace period.
3. Customer Information Sheet, item 5 (“Policy Coverage”): insurers must list every benefit here, including any bonus.
4. Definition of “Sum Insured”: whether it includes the bonus, and the order in which the parts are used in a claim.
5. Room rent and other percentage limits: whether they are based on the “base sum insured” or the “sum insured”.
6. Renewal notice: that the bonus shown matches the schedule before you pay.

Where people get caught out

• Renewing a few days late. Pay before the grace period ends, and keep the receipt.
• Not checking the bonus after a claim. If the schedule shows a cut your wording doesn’t allow, raise it with the insurer.
• Combining policies without asking. Moving parents and children into one floater can cost accrued bonus.
• Counting the bonus as fixed cover. In wordings that reduce it after a claim, next year’s cover can shrink.
• Porting without written confirmation of how the bonus is credited.