What is Cumulative Bonus In Health Insurance And How Does It Work?

What is a Cumulative Bonus in Health Insurance?

A cumulative bonus in health insurance, often known as the “no-claim bonus”, is offered by health insurance providers to those policyholders who haven’t made a claim during the policy year. It’s intended to be an incentive for policyholders who are not incurring costs for the company. Typically, this reward is reflected in an increase to the sum insured, which is the maximum amount your policy will cover. This is done without charging any additional premium, as is the normal case with raising the sum insured. 

How Does a Cumulative Bonus in Health Insurance Accumulate?

Although the nuances of calculating and offering such bonuses vary from provider to provider, the core concept remains pretty much the same across companies. These are the key points considered in the process.

1. Eligibility

When you complete a whole policy year without making any claims, you are eligible for a cumulative bonus.

2. Bonus Structure

The bonus of the cumulative bonus in health insurance is typically offered as a percentage increase in the sum insured. For example, let’s assume your base policy amount is ₹5,00,000. The active bonus rate of your insurer is 10%. In this case, if you go through an entire policy year without making any claims, your sum insured will increase by 10%. The bonus amount will be ₹50,000, and when it is added to your policy amount, your sum insured becomes ₹5,50,000. The bonus rate can vary from 5% to 50% per year.

3. Annual Increment

For consecutive claim-free years, the bonus can keep accumulating. However, the amount might be restricted to a limit, which can be 50 to 100% of the original amount insured. This means your policy amount will increase by a maximum of 50% or 100% over consecutive claim-free years. Going back to our example, a policy amount of ₹5,00,000 could grow to ₹7,50,000 or ₹10,00,000 with 50% and 10% bonus, respectively, without an increase in premium.

4. Impact of Claims

When you make a claim, the bonus accumulated in the previous year may be reduced or even fully reset, depending on your policy terms and conditions. In most cases, all the bonus added to the original sum is removed once a claim is made.

How to Transfer the Cumulative Bonus While Porting?

If you wish to transfer your bonus while porting your insurance policy, then the first step would be to apply at least 45-60 days ahead of your current policy’s renewal date, as per IRDAI’s guidelines. Your new insurer will check your documents and terms, and recognise the accumulated bonus as of the date. You will need to submit the required documents, including policy agreements, a notice of renewal, your claim history (which must show that you have not made any claims), and a portability application form. 

How to Claim with a Cumulative Bonus in Health Insurance?

Now that we have understood how the cumulative bonus works, let’s move on to how the cumulative bonus can be claimed. When you file a claim, the current value of your policy (original sum insured plus the added cumulative bonus) becomes available for your use. For example, if your policy amount is ₹5,00,000 and the bonus added is 50% of it, then the current value is ₹ 7,50,000, and it will be available. This amount represents your maximum claimable limit. 

Simply put, the cumulative bonus gives you a larger safety net for medical expenses, rewarding your claim-free streak while ensuring robust coverage when needed.

Steps to Make a Claim

There are two kinds of claims made in health insurance cases. For a cashless claim, you would receive treatment at a hospital that is part of the insurer’s network. This way, the insurer will directly settle with the hospital after the claim is approved. In other cases, you will have to settle the bills and then claim reimbursement from your insurer.

• Step 1: Inform your insurer about the medical procedure. The time allowed for this step is usually 24-48 hours for emergencies. In planned hospitalisations, the time window is ideally a few days before the procedure begins. 
• Step 2: After informing your insurer, submit the necessary documents. This includes your medical bills, prescriptions, diagnostic reports and policy documents as well.