We know about health insurance plans. They aim to compensate us for tragedies, like deadly accidents or other losses. These policies are well-curated and well-advertised nowadays in terms of safety and security, covering a variety of areas such as health insurance for medical, job, property, and even insurance for bodily parts.
Despite a lot of advertising and easily available plans, there are people who still refuse to invest in insurance policies, despite this being a necessity in today’s world.
Health insurance acts as a safety net for injuries or emergencies. Imagine falling off a tightrope. You’d get hurt, but a safety net prevents further harm. Similarly, health insurance saves you from financial burdens during emergencies. So, the best plan is the one that perfectly matches your needs.
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What is a No Claim Bonus in health insurance?
As the name suggests, No Claim Bonus means the bonus you are receiving for not claiming your plans! A No Claim Bonus in health insurance rewards policyholders for not claiming benefits in a year. To get benefits, one must have valid reasons to claim. Essentially, a No Claim Bonus indicates you haven’t used your insurance plan benefits.
It is one way for health insurance companies to reward their policyholders for maintaining their health and not claiming insurance benefits. The bonus is added to your insured amount, which one can claim later.
Hence, no claim bonus is one of the things to consider before applying for your health insurance policy.
How does the No Claim Bonus work?
Ever heard about reward programs for shopping? When you go around buying your favorite clothes, jewelry, or even groceries from your shopping complex, the stores sign you up for reward programs where you are rewarded for shopping. The more you buy, the more reward points you will earn. You can use them for future shopping.
It’s like a parent who rewards their kids for good behavior. This includes hygiene, cleaning their rooms, and eating their greens.
The policyholders are granted the reward under the no-claim bonus. The initial amount one has insured under the health insurance scheme increases by a specific set amount. The limit set up under the no-claim bonus policy doesn’t change after a specific amount. The terms and conditions for the cumulative bonus can vary from one insurance firm to another. In a claim-free year, the cumulative bonus is added to the insured sum.
Types of No Claim Bonus in health insurance?
No Claim Bonus in health insurance has two categories;
Discount on premium
Every insurance plan has a term; in order to extend your term, one has to pay a renewal amount, usually in a year. The renewal amount has to be paid before the policy is due. The insurance company usually sends a notice to renew your policy. This is called a renewal premium.
Under discount on premium bonus, the amount of renewal premium decreases every year if you are not claiming your health insurance benefit. The cost of renewal is reduced; however, it does not affect the benefit of the policies.
For example: Suppose a coffee shop where you drink coffee every day rewards you with loyalty points under its reward program. You are buying coffee every day with 200 INR and getting a discount coupon, but you are not using it (not making any insurance claim). You have collected coupons over months but haven’t used any. Finally, after your 20th cup of coffee, the cafe gives you 10% off your next coffee purchase (renewal premium) as a reward for not using coupons. So the coffee will cost you 180 INR instead of 200.
Cumulative bonus
Under the cumulative bonus, if the policyholder has a claim-free year, then the insured sum increases by a certain amount. Every time you have a no-claim year,the no-claim bonus is added to your fund. The renewal premium remains the same,it does not change.
Benefits of the No Claim Bonus in Health Insurance.
Financial saving
No-claim bonus offers benefits to stay fit! For taking good care of your health, you get to choose a policy as per your contract, and you can use the bonus for discounts without worrying about your healthcare expenses.
Increase the sum without extra charges.
With a claim-free year, some amounts are added to your insured sum as a no-claim Claim Bonus! You’re getting extra coverage at your expense without making any extra payments aside from renewal. This is beneficial, as you will have extra financial help in case of need.
Reduce renewal costs.
Without making a claim, you can get a discount on your next renewal while your insured sum remains the same. The real amount decreases every year if you are not making any claims. This way, you will receive the same benefit at a reduced cost.
Reading some bonuses.
Even if you’re making an insurance claim in a time of need, a no-claim bonus policy can allow you to retain some parts of the bonus as a reward for a claim-free year.
Individual and family health
Both family and individual health plans offer a no-claim bonus, but terms vary by company.
Conclusion
To summarize the benefits of this policy, not all insurers provide these bonuses. So, consider the no-claim bonus policy before choosing a plan. If a company offers it, review the terms carefully. Check how much premiums can increase and the potential bonus amount. This ensures you pick the right plan.
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Also, check out our recent post on: “Tax Harvesting: A Way To Reduce Taxes On Mutual Fund Returns“
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Disclaimer – This article is for educational purposes only and by no means intends to substitute expert guidance. Mutual fund investments are subject to market risks. Please read the scheme-related document carefully before investing.
