If you keep your health insurance policy and refrain from filing claims for a long time it is possible that you will be paid for it. The reward is usually from something known as a cumulative benefit. If you’ve read this phrase in your policy, or read about it from an insurance company and are wondering what it could mean it’s the right spot.
In this article we’ll go over the definition of what a cumulative benefit in health insurance means and how it operates and the various types and the benefits you enjoy from it, as well as what happens if you have to file an claim. This guide is designed specifically for Indian policyholders looking to maximize the benefits of their health insurance coverage.
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What is the Cumulative Bonus in Health Insurance?
An accumulation bonus can be described as an additional benefit that you can get through your insurance company even if you don’t submit any claims in the course of a policy year. Instead of letting the year go by without benefit, the insurer will reward you by increasing the amount that you are covered. Your overall insurance increases year on year without having to pay any additional fees.
Some insurance companies might reduce your cost, allowing you reduce the financial burden.
What is the Cumulative Bonus? with Health Insurance?
Let’s break it down into a straightforward illustration.
If there’s a health insurance policy that includes Rs 5 lakhs. It has a benefit that increases your insurance premium by 10% each year that you don’t submit claims, to 50 percent. If you don’t make a claim during your first year your coverage grows to Rs5.5 lakhs the following year. You can claim for five consecutive years and your insurance will reach Rs7.5 lakhs.
In certain cases rather than raising the amount insured the insurer might offer you a discount on your cost. For instance, if the annual premium is $10,000 and your insurance provider offers a discount of 5% for a claim-free year then you’ll pay Rs9,500 the following year. Repeat this process for five years, and at six years, the premium will drop to just Rs7,500. Therefore, regardless of whether you have more coverage or less the cumulative bonus offers you an obvious benefit in maintaining your health.
What is the difference between the Cumulative Bonus and a No Claim Bonus?
It’s not really. These terms are commonly employed interchangeably, particularly in the field of health insurance. In motor insurance the no-claim bonus typically is a discount on renewal costs in exchange for not bringing any claims. Health insurance is where the concept is the same, however it’s known as an accumulation bonus.
No matter if your insurance company refers to it as a no-claim bonus or a cumulative bonus, the result is the same. You can either receive more protection or pay a lesser cost when you don’t submit an insurance claim within your policy time.
Different types of cumulative bonuses You Should Be Educated About
- Bonus in Percentage of the Sum insured:
This is the most popular kind. The bonus you receive is calculated in terms of a percentage of your total amount insured. Let’s say that your insurance is Rs 5 lakh and the bonus is 10 percent. After a year of no claims your insured amount increases to Rs5.5 lakh. If you continue to avoid claims, the bonus continues to grow each year. - Bonus in the form of a fixed amount:
As opposed to a percent rate, some insurance companies provide a predetermined bonus amount. In this case, they may increase the amount of Rs20,000 or Rs60,000 your coverage every year even if you do not make an claim. This is a simple method and is a good option if you want to know exactly what more coverage you’ll be getting. - Bonuses Applied During Renewal:
In a lot of policies the cumulative bonus begins only after you renew your insurance. If you didn’t submit any claims during the year the bonus will be included in your next year’s total that you are insured for when you renew your plan. - Bonus that is reduced following the Claim:
Certain policies don’t allow you to keep your bonus. If you submit an claim, certain insurers may reduce your reward or even change it. For instance, your reward could be reduced by half or eliminated completely after a single claim. Some companies will offer partial reductions, rather than eliminating it completely. - Family Floater Bonus Policy:
If you are a member of a family floater insurance policy and the bonus is applicable to the total amount of coverage that is shared by the members of your family. If no one in the family is liable for an claim and the bonus is included in the overall amount covered. Everyone gets benefit from it. - Bonus for remaining claim-free for Many Years:
Certain insurers go an extra step. If you don’t make a claim for a period of 2 or 3 years and you are eligible for more than someone who had no claim for one year. This type of bonus reward rewards the person who is healthy in the long haul.
Benefits of Cumulative Bonuses in Health Insurance
Acquiring a cumulative bonus can reduce your expenses and bring you assurance. This is how:
- You’re rewarded for remaining well and not making assertions.
- The coverage of your insurance policy increases, but you aren’t having to pay more or less or having your premium decreased.
- It will help you avoid the expense of re-insuring the amount of insurance you have.
- Certain insurers permit this bonus to accumulate over the course of 10 years, providing an increased protection.
- It may help with small medical expenses and serve as a cushion of financial protection during emergency situations.
- It helps you remain on top on your fitness and to manage medical costs more effectively.
Things to Remember about Cumulative Bonus
Here are some easy but vital points to be aware of when choosing the health insurance plan that offers the cumulative bonus
- The cumulative benefit is accessible only in indemnity-based policies, not with fixed benefit plans.
- There’s a limit to the amount of bonus you are able to earn. After that cap is reached, your insurance will not increase even if you do not declare claims.
- If you file a claim, the reward is forfeited or reduced by the exact amount at which it was credited.
- If you transfer your health insurance policy to another provider your cumulative bonus may be transferred to the new policy.
Always read the rules carefully and inquire from your insurance provider regarding how they handle cumulative bonuses as well as claims.