Health insurance, once a luxury, now has become a necessity in today’s day and age. With rising instances of ailments, which are either related to lifestyle or due to family history, skipping on health insurance is like throwing caution to the wind. This might not work well in the long run as it can put a dent in your finances leading you to a debt trap to fund medical treatment. Since medical treatment is not something you can skip, the need for a backup in the form of health insurance has become critical.
Among the myriad options of health insurance plans, there are some features that can make a policy stand out. This also depends on your need and coverage expectation from a health insurance policy. But have you ever thought about what happens when no claim is made during a policy tenure? It is an interesting question to ponder upon. Leading insurance companies offer a reward for it. This reward is in the form of a cumulative bonus.
What is a cumulative bonus?
A cumulative bonus is a feature of health insurance policies where the insurance company increases the sum assured of your coverage for every claim-free policy tenure. Akin to the concept of no-claim bonus in motor insurance, it deviates where there is no subsidisation of the premium charged, but instead, the coverage of your policy stands increased.
Understanding cumulative bonus using an example
You purchase an individual health insurance policy with a sum assured of ₹10 lakhs. It is not always medical treatment will be required during a policy tenure. For such cases, if the benefits of health insurance policy include a cumulative bonus as one of its features, the sum insured of your plan will be increased for every consecutive claim-free policy tenure.
What is the amount of cumulative bonus?
Unlike the no-claim bonus in motor insurance policies, there is no fixed amount of cumulative bonus. This amount differs among health insurance companies. However, most insurance companies offer a maximum of 50% increase in the sum assured which starts at 5% for the first year and is followed by 10% each year later.
Does the benefit disappear if any claims are made after accumulating such a bonus?
The answer to this depends on the terms of the insurance contract. For instance, some insurance companies continue to offer a cumulative bonus even if a claim is made, whereas a few others reinstate the original sum insured at the next renewal. Some insurance companies even offer a lower cumulative bonus in case the claim is for a smaller amount. However, these terms need to be checked within your insurance contract at the time of purchase.
Can cumulative bonus be transferred for change of insurer?
This again depends on case to case basis as the benefits offered by your new insurer may differ from your existing insurance company. For this reason, you need to verify whether such transferability is allowed. Moreover, some insurance companies consider the increased sum assured after the cumulative bonus as the new sum assured of your insurance policy at the time of porting.
These are some benefits offered by insurance companies when no claim is made during a policy tenure. Not only does it increase the sum assured of your insurance coverage, but the premium also remains the same. Remember to use a health insurance premium calculator when buying or renewing your policy to know the impact of any additions to your coverage. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.