Complete guide to no claim bonus (ncb) in health insurance

Health insurance is an investment worthy of its name. It is one of the most beneficial investments that come with a lot of perks, including medical coverage and financial security. One of the many perks of health insurance is the no-claims bonus, often abbreviated as NCB. The no-claims bonus in health insurance means a monetary reward that insurance companies provide to policyholders for not filing insurance claims.

NCB in health insurance is a financial benefit that either reduces your premium outgo or enhances your health insurance sum insured. The insurer takes into account the number of claim-free years to determine the no-claims bonus you are entitled to, and they typically offer this bonus during the first few years of the policy term.

How Does Health Insurance No Claims Bonus Work?

As a policyholder, you become entitled to a no-claims bonus when you do not file an insurance claim in a given policy year. Insurers typically provide the NCB health insurance benefit in the first five years of the policy. 

The insurer may reduce your insurance premium by a specific percentage, thus providing a discount on your health insurance premiums. Alternatively, the insurer may increase your sum insured by a specific amount without increasing your insurance premiums. Most health insurance providers in India typically offer enhanced sums insured instead of discounts.

Types of NCB in Health Insurance

Insurers categorise health insurance no claims bonus into two types.

• The Discount Benefit

The discount benefit allows you to purchase your existing medical insurance policy at a discounted premium amount. While the insurer reduces your premium, all your health insurance benefits remain intact. The benefit kicks in after you do not file a claim at the end of the first policy year. 

The insurer generally offers a 10% discount for every claim-free year, up to five years. Thus, by the end of the fifth year, you can get a discount of up to 50% on your insurance premiums, provided you do not file any insurance claims during the first five years of your policy period.

• The Cumulative Benefit

The cumulative no-claims bonus in health insurance means that while the insurer does not reduce or increase your premiums, they increase or enhance your sum insured amount. In the cumulative benefit, you have to continue paying the same premium amount, but the insurer increases your coverage.

Insurers generally increase your sum insured amount by 10% each year for every claim-free year. To qualify for this benefit, you should not have filed medical insurance claims in the first five years of the policy period. By the end of the fifth continuous claim-free year, the insurer increases your sum insured by 50%. The enhanced sum insured provided under the cumulative NCB in health insurance benefit proves helpful as it allows for inflation-adjusted benefits.   

Policies Covered Under NCB in Health Insurance

Health insurance providers usually categorise insurance plans into two types – indemnity plans and definite plans. However, they only offer the no-claim bonus on health insurance indemnity plans.

Under indemnity plans, the insurance provider is only obligated to indemnify or reimburse you for the actual medical costs incurred when you file a medical insurance claim. Also, such plans generally come with lower sums insured, and the premiums are usually affordable. The standard indemnity plans include individual health insurance plans, family floater plans, senior citizen plans, etc. 

In contrast, definite plans usually come with significantly high sums insured and are generally expensive, costing higher annual premiums. Also, the insurer disburses the entire sum insured in a single lump sum when you file a definite insurance claim. Insurers, therefore, do not provide the no-claims bonus benefit on definite policies like critical insurance health insurance plans, cancer policies, and personal accident insurance plans. 

No Claims Bonus Health Insurance – Facts and Considerations

While NCB in health insurance offers money savings benefits, you must consider certain facts and considerations to qualify for this benefit. 

• Eligibility

The insurer outlines the eligibility terms and the maximum no-claims bonus health insurance benefit you can get in the insurance policy document. You can claim the benefit as early as three years into the policy period, but you must check with your insurer if you are eligible for the same.

• Progressive Increase

Whether you qualify for the discount or cumulative NCB in health insurance benefits, you can obtain it progressively only. Thus the insurer may offer a discount or increase the sum insured by 10%, 20%, 30%, 40%, and 50% at the end of the first, second, third, fourth and fifth policy year, respectively. Insurers do not offer the NCB benefit instantly.

• Benefits Termination

Insurers offer the NCB benefit only when you renew your medical insurance plans. If you do not renew your policy by the due date, the NCB benefits accrued over the years will expire, and you will lose the same. To continue accruing the no-claim bonus health insurance benefits, you must ensure you renew the policy latest before the policy grace period ends. 

• Transferability Clause

Insurance providers allow you to transfer or port your existing health insurance policy to another insurance company if you choose, provided the other insurance provider is willing to take you on as a customer. If you elect to utilise this option, you can also port your accrued no-claims bonus benefit to the new insurer. 

• Low Claims Value

Earlier, insurers provided the NCB in health insurance benefit only for entirely claim-free years. However, per a new directive by the Insurance Regulatory Development Authority of India (IRDAI), you may qualify for the no-claims bonus, provided the value of your medical insurance claim amount is low. This rule applies only in the case of long-term policies, and the insurer is only authorised to deduct the no-claims bonus, not suspend it altogether. 

Benefits of No Claims Bonus for Health Insurance

• The primary benefit of NCB health insurance is that it enables savings, irrespective of the type of NCB benefit your insurer offers. 
• In the case of the discount benefit, you can save thousands of rupees in insurance premiums with every progressive policy year when you do not file a claim. The reduced premiums help you save money, which you can invest elsewhere. 
• You also save a lot of money if your insurer offers the cumulative no-claims bonus benefit. While the insurer may not reduce the premium, the increased sums help you to get continuous coverage at the same price but with an increased coverage amount. 
• With the continuously increasing medical costs, the increased coverage proves a boon due to its inflation-adjusted benefits. Thus, while the medical costs may increase with each passing year, your sum insured also increases. If you need hospitalisation and have to file an insurance claim, the increased sums insured reduce your out-of-pocket expenses if the costs are higher. 
• A higher sum insured also means that you need not compromise while getting the best medical care, as opposed to only barely affordable treatment. You can consult reputed medical practitioners and seek medical treatment at the best healthcare facilities without worrying about costs.