Health insurance has emerged as an essential requirement in the current age, providing individuals and families with financial protection against unforeseen medical expenses. One important feature of health insurance policies is the Cumulative Bonus (CB), a benefit offered to policyholders who do not file any claims during a policy year. This bonus is designed to reward policyholders for leading a healthy lifestyle and encourages them to avoid unnecessary medical expenses. It typically results in an increase in the sum insured, providing added financial protection over time.

What is a Cumulative Bonus in Health Insurance?

A Cumulative Bonus is a feature included by most insurance providers, designed to offer policyholders an advantage for not submitting any claims. This bonus can either increase the sum assured or provide discounts on premiums during policy renewal. The bonus varies depending on the insurer and the specific policy, but it serves as a rewarding tool for claim-free years. While the bonus might differ in structure, the essential idea remains consistent: policyholders benefit by accumulating bonuses for each claim-free year.

Types of Cumulative Bonus in Health Insurance

1. Bonus Based on Percentage of Sum Insured: This is the most common form of cumulative bonus, where the bonus is calculated as a percentage of the sum insured. For example, if a policyholder has a sum insured of ₹5 lakh and a 10% bonus, their sum insured would increase by ₹50,000 for each claim-free year.
2. Bonus Based on Fixed Amount: Instead of a percentage, some policies offer a fixed amount as a bonus, such as ₹25,000 or ₹50,000, regardless of the original sum insured. This method can be preferable for those who want a predictable increase in their coverage.
3. Bonus on Renewal: Some policies offer a cumulative bonus during the renewal of the policy. If the policyholder remains claim-free, the bonus is added to the sum insured for the new policy year. This process generally happens each time the policy is renewed.
4. Bonus that Reduces After a Claim: In certain policies, the cumulative bonus may decrease or reset after a claim. For instance, the bonus could be halved or set back to zero following a claim, though some insurers may allow it to continue at a reduced rate.
5. Bonus for Family Floater Policies: In family floater policies, the cumulative bonus applies to the entire family’s coverage. If no claims are made by any family member, the bonus is shared and increases the total sum insured for all covered members.
6. Bonus for No Claims in Multiple Years: Some insurers offer a higher cumulative bonus if a policyholder goes claim-free for several consecutive years. This means that avoiding claims for two or three years might result in a larger bonus than for a single claim-free year.

Benefits of Cumulative Bonus

• Increased Sum Assured: The most significant benefit of a cumulative bonus is the increase in the sum assured without any additional premium. The bonus is typically accumulated over time, increasing the sum assured by a certain percentage each claim-free year.
• Maximum Duration: The cumulative bonus typically applies for up to 10 years, allowing policyholders to accumulate significant benefits over time.
• Policy Document: The details of the cumulative bonus, including the percentage or fixed amount and the terms for its accumulation, are outlined in the policy document. Policyholders should thoroughly read this document to understand their entitlements.
• Impact on Timely Renewal: It’s important to ensure that the policy is renewed on time, as failure to do so may result in the forfeiture of any cumulative bonus accumulated during the policy term.
• Bonus Range: The cumulative bonus generally ranges from 10% to 100% of the sum assured, depending on the insurer and the policy.
• Continuity of Benefits Across Policies: Even if a policyholder switches insurers, they may still receive the cumulative bonus, provided there is no overlap between policies, and the bonus is not reset to zero.
• Withdrawable Benefits: The cumulative bonus can either be withdrawn fully or deducted from the premium when renewing the policy, offering additional flexibility.

The Role of Cumulative Bonus in Health Insurance

• Increased Coverage Over Time: The cumulative bonus enhances the sum insured after each claim-free year, providing increased coverage without raising the premium. This can provide additional financial security for future medical needs.
• Reward for Claim-Free Years: The bonus serves as an incentive for policyholders to refrain from making claims unnecessarily. This promotes a healthier lifestyle and reduces the insurer’s claim costs, benefiting both the insurer and the policyholder.
• No Additional Premium Costs: One of the most attractive features of the cumulative bonus is that it does not require the policyholder to pay a higher premium. The increased coverage comes at no additional cost, which makes it an appealing feature for policyholders.
• Encourages Health Management: By rewarding claim-free years, the cumulative bonus system encourages policyholders to take better care of their health and avoid illnesses, thereby reducing overall healthcare costs.

Conclusion

In conclusion, the cumulative bonus in health insurance offers substantial benefits for policyholders who maintain a claim-free record. It rewards individuals for their healthy lifestyle by increasing their sum insured over time, without requiring additional premium payments. This bonus serves as a powerful incentive for policyholders to avoid unnecessary claims and maintain their health, while providing extra financial security for medical emergencies. Understanding how the cumulative bonus works can significantly enhance the value of a health insurance policy, ensuring better coverage and reduced costs in the future.