Did You Know That the NCB Doesn’t Exist in Group Insurance?

Back in our school days, our teachers often rewarded us with a bonus period of games if we maintained discipline throughout the day. We would be excited and felt more encouraged to follow class rules to the tee. After all, who would mind a little extra something? Now imagine you receive a bonus just for taking good care of your health all through the year. Does it sound too good to be true? You actually receive an extra payment known as a no claim bonus in group health insurance, provided you fulfill certain criteria.

What’s a no-claim bonus?

A no claim bonus (NCB) in health insurance is a financial incentive offered to the insured by the insurer for not raising any claim during the previous policy tenure. It is extra money added to the sum insured as a reward to the policyholder for every claim-free year. Hence, the NCB is a key factor that influences the purchasing decision of most health insurance buyers in India. And for the insurers, it is always easier to offer no claim bonus than settle a claim that often amounts to lakhs. Both private sector and public sector insurance companies provide NCB to all their eligible policyholders. 

What are the types of no claim bonuses and how does it work in each case?

The two types of no claim bonuses are:

Cumulative bonus:

Under cumulative NCB, no discount is offered on the premium amount. However, your sum insured grows at a fixed percentage rate. Thus, the insured is rewarded with a bigger sum insured at the time of policy renewal for not raising a claim in the previous year.

For instance, you have purchased health insurance worth Rs.10 lakh. The insurer offers 5% of cumulative NCB for every claim-free year. You raise no claim for a consecutive period of 3 years. Your sum insured grows as follows:

After 1st year of no claim: Rs.10,50,000

After 2nd year of no claim: Rs.11,00,000

After 3rd year of no claim: Rs.11,50,000

This sum would keep increasing after every no-claim year until it reaches Rs.15 lakh.

Note: The various terms used for no claim bonus, super no claim bonus, cumulative bonus, and additional sum insured are all one and the same thing with some subtle differences created by insurers.

Discount on premiums:

This type of NCB allows a discount on the premium amount at policy renewal. Hence, the insured continues their health insurance policy at a discounted rate.

For instance, you pay a premium of Rs.20,000 for a health insurance plan worth Rs.10 lakh. The insurance company offers a 5% discount on premium for every no-claim year. For 3 consecutive no-claim years, your premium amounts to:

After 1st no-claim year: Rs.19,000

After 1st no-claim year: Rs.18,000

After 1st no-claim year: Rs.17,000

Usually, most articles offer a cumulative bonus and not a discount in premium these days.

Advantages of no claim bonus:

  • NCB ensures better financial protection for the insured during medical emergencies.
  • It lessens the renewal cost of your health insurance. You receive more coverage at the same premium.
  • It inspires the insured to stay healthy and encourages raising claims only when it is absolutely necessary.
  • Even at the time of shifting your health insurance policy from one insurer to another, you will continue to enjoy the accumulated no claim bonus. So when you port your health insurance plan, your NCB is carried forward.

Does a group insurance policy offer no claim bonus?

Not every health insurance plan in India comes up with the facility of NCB. The plans that provide no claim bonus have their own terms and conditions. Hence, a group insurance policy limits your scope to address individual-specific requirements and deprives you of the privilege of earning no claim bonuses. 

Take-away:

The non-availability of a no-claim bonus in a group insurance scheme is kind of a deal-breaker. Why lose on such a lucrative way of enhancing your coverage at a time when rising healthcare costs are a real concern in our country. It’s time for you to shift from group insurance to individual insurance. To know more check

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