3 min
08-November-2024
With the rise in healthcare costs, health insurance has become an indispensable commodity in today's times. One key feature to understand about health insurance policies is the concept of the Cumulative Bonus. As the name suggests, a cumulative bonus in health insurance is a reward for making no claims throughout the policy year, offered as a higher sum insured in the subsequent policy year. This article explores the concept of the cumulative bonus in health insurance, how it works, its benefits, and tips to maximise its potential.
The cumulative bonus is designed to incentivise policyholders to avoid making small or unnecessary claims, thereby encouraging responsible use of their health insurance. Over time, this bonus can significantly enhance the coverage of a health insurance policy, providing greater financial protection against future medical expenses.
For example, if a health insurance policy has a sum insured of Rs. 5 lakh and the policyholder does not make any claims during the year, the insurer might add 5% of the sum insured, which is Rs. 25,000, to the coverage for the next year. This means that in the next policy year, the sum insured will increase to Rs. 5.25 lakh. This process continues each year if no claims are made, allowing the cumulative bonus to accumulate and enhance the policy's coverage.
It is important to note that there is usually a cap on the cumulative bonus. Many insurers set a maximum limit, such as 50% or 100% of the original sum insured, beyond which the cumulative bonus will not increase.
Read more: How to claim health insurance?
What is a cumulative bonus in health insurance?
A cumulative bonus in health insurance is a reward provided by insurance companies to policyholders for not making any claims in a policy year. This bonus is usually added to the sum insured at the time of policy renewal without any additional cost to the policyholder. Essentially, it is an increase in the insurance coverage amount without an increase in the premium, offered as a reward for maintaining a claim-free year.The cumulative bonus is designed to incentivise policyholders to avoid making small or unnecessary claims, thereby encouraging responsible use of their health insurance. Over time, this bonus can significantly enhance the coverage of a health insurance policy, providing greater financial protection against future medical expenses.
How does a cumulative bonus work in health insurance?
The mechanism of a cumulative bonus in health insurance is straightforward. When a policyholder does not file any claims during a policy year, the insurer adds a certain percentage of the sum insured to the policy for the following year. This percentage can vary from one insurer to another but typically ranges between 5% to 10% of the sum insured.For example, if a health insurance policy has a sum insured of Rs. 5 lakh and the policyholder does not make any claims during the year, the insurer might add 5% of the sum insured, which is Rs. 25,000, to the coverage for the next year. This means that in the next policy year, the sum insured will increase to Rs. 5.25 lakh. This process continues each year if no claims are made, allowing the cumulative bonus to accumulate and enhance the policy's coverage.
It is important to note that there is usually a cap on the cumulative bonus. Many insurers set a maximum limit, such as 50% or 100% of the original sum insured, beyond which the cumulative bonus will not increase.
Read more: How to claim health insurance?
