Many young and healthy people believe that purchasing health insurance is a waste of money. However, this is far from the truth. Buying insurance when you are young not only saves you money on premiums but also prepares you for future medical uncertainties. You also get a health insurance tax benefit that you should not overlook. But most importantly, health insurers offer a cumulative bonus to assist you in your planning. If you are not familiar with this jargon, read on to learn more.
What is a cumulative bonus in health insurance?
A cumulative bonus is a reward given by your health insurance provider for maintaining good health. When you don’t make a health insurance claim during the policy period/policy year, the insurer rewards you with an incentive when you renew your policy. The insurer increases the amount of the sum insured up to a certain percentage.
How does a cumulative bonus in health insurance work?
The cumulative bonus percentage may change depending on the insurer and the medical insurance plan. However, the cumulative bonus for the majority of them ranges from 10% to 50%. If you do not file a claim within the first year of your policy, the insurer will raise the total sum insured by 10%. The percentage goes on increasing with each claim-free year.
Let’s look at an example to better understand the concept of a cumulative bonus.
Assume you bought a policy with a ₹3 lakh sum insured. Since you are young and have been free from any disease for the past five years, you have never felt the need to file your health insurance claim. In this case, the insurer will increase your sum insured by 50%, bringing it to ₹4.5 lakh for not filing a claim for five years.
Here is the table that will brief you on the cumulative bonus.
| Claim free years | Cumulative bonus |
| The first year without a claim | 10% |
| Two consecutive years without a claim | 20% |
| Three consecutive years without a claim | 30% |
| Four consecutive years without a claim | 40% |
| Five consecutive years without a claim | 50% |
Benefits of cumulative bonus in health insurance
A cumulative bonus has various advantages, the two most prominent of which are:
- Increased sum insured
A cumulative bonus is a reward offered by your insurer for not submitting a claim during the policy year. If you do not file a claim during the first year, your total sum insured will be increased by 10%. Whereas if a claim is not submitted for five years in a row, the insurer will grant a 50% increase in the sum insured.
- Discount on policy premiums
There are several health insurance providers who, instead of raising a sum insured, offer a discount on the policy premium. Let’s take an example to understand this point.
Assume you paid ₹15,000 for XYZ sum insured when you purchased your health insurance. When you renew your policy after a year without making a claim, the insurer reduces your premium by 10%, which means you will be paying ₹13,500 for the same advantages you were getting before.
Key points to know about cumulative bonus in health insurance
Before you go any further, there are a few things you should keep in mind if you are looking to buy medical insurance.
- In health insurance, cumulative bonuses are usually of two types—one that lowers your premium and the other that increases the sum insured of your policy.
- The cumulative bonus percentage differs with every insurer. The range also varies depending on the medical plan you select.
- A cumulative bonus is available for individual health insurance and family floater medical insurance.
- A cumulative bonus will be available to you only if you are renewing your policy on time. If you fail to renew your policy even within the grace period, the cumulative bonus will be forfeit.
- Many people assume that getting regular health check-ups lowers the cumulative bonus. However, this is not the case. Health insurance companies provide free vouchers for routine health checks that do not influence your cumulative bonus.
- A cumulative bonus encourages you to stay fit and active.
- With the country’s medical inflation rate on the rise, having a substantial amount of sum insured will surely assist you in dealing with rising medical expenditures.
To sum it up
Purchasing medical insurance has several advantages. It allows you to receive benefits in the form of a cumulative bonus for being fit and healthy throughout the policy year. By leading a healthy lifestyle, you can either increase your policy sum insured or lower your policy premium. So, if you want to get the most out of your insurance, pay for minor medical expenses yourself and leave the major medical costs to your coverage.