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What is Cumulative Bonus (CB) in Health Insurance & How it Works?
So, you’re thinking of buying health insurance. And amidst your decision-making process, you think, “Wait a minute, what happens if I don’t make a claim at all”?
You may be worried that your premium payments will simply go down the drain. But what if we tell you that you can get rewarded for staying healthy, i.e. for not making any claims, too?
Yes, we’re talking about a bonus. In insurance terms, this is referred to as a ‘cumulative bonus’. Let’s understand what a cumulative bonus in Health Insurance and how it works!
Table of Contents
What is a Cumulative Bonus in Health Insurance Policy?
A cumulative bonus in a health insurance policy refers to a monetary advantage you gain as a reward for not making any claims in one policy year. It is very similar to the concept of a no claim bonus.
However, the type of benefit you receive differs from one health insurer to another. Some insurers reward you with a discount on your premium for your consequent policy year. In contrast, some insurers offer an additional sum insured to your health insurance without any increase made in your health insurance premium.
Typically, most insurers offer a 5% to 50% increase in the sum insured for each claim-free year.
However, at Digit, we offer you an increase in your Sum Insured, up to 50% for every claim-free year (with a maximum benefit of 100%). 🙂
What are the Types of Cumulative Bonus in Health Insurance?
Did you know there are types of cumulative bonus for health insurance in a claim-free year? Yes. Generally, the cumulative bonus is provided in two different types. Let’s understand both of them:
Discount on Premiums
As previously stated, insurance companies provide this type of bonus to policyholders who maintain a claim-free record for a full year. In this case, the insurance provider would provide the policyholder with a lower premium for the same amount (same sum insured) in their next cycle.
A discount on the premium option may not be available under every insurance policy, and the advantages of the bonus vary depending on the insurance company. Therefore, it is crucial to look for this feature and select a policy that offers it.
Bonus on the Sum Insured
If you haven't filed a claim for a year, your medical insurance plan's sum assured is boosted with a cumulative bonus. In this manner, you might receive greater benefits from your health insurance for the same amount.
The rise in the sum insured in health insurance under cumulative bonus is contingent upon the percentage provided by the insurance provider and may differ between insurers. However, the coverage has a cap that can be raised through cumulative bonuses.
Cumulative Bonus Explained with Example
The cumulative bonus provided by different insurance companies differs from one insurer to another. Generally, most insurers offer a 5 to 50% increase on the sum insured for every claim-free year.
Let’s understand with a simple example:
Mr. Amit bought an infinity wallet plan from Digit Insurance for a sum insured of INR 10 lakhs. He is fit and healthy and has not undergone hospital visits in a year. Thus, it has been a year since he has made any claims.
In the first year, he received a 50% bonus, which made his total sum insured around INR 15 lakhs. In the second year as well, he did not make any claim, and thus, he received a 100% bonus on his initial sum insured making it INR 20 lakhs.
Confused? Understand the example with this chart!
Note: This was just an example to show how an increase to your Sum Insured would work with a Cumulative Bonus for Digit’s Health Insurance (Infinity Wallet Plan). Every insurance plan will offer different rates of increase in sum insured or discounted premium.
Cumulative Bonus in Health Insurance Explanation
Discover how a claim-free year in your health insurance brings sweet rewards! Watch as we explain the concept of a Cumulative Bonus using everyone's favourite treat—chocolates!
See how each claim-free year adds more chocolates (and benefits) to your policy, making it more valuable over time.
Understanding the Role of Cumulative Bonus in Health Insurance
In health insurance, cumulative bonuses are essential for encouraging good habits, improving affordability, cultivating loyalty, supporting preventative care, and guaranteeing insurance coverage during emergencies.
Here are some important roles of cumulative bonus in health insurance:
Encourages Healthy Behavior
The Cumulative Bonus encourages better lifestyles and preventative care procedures, rewarding policyholders for being healthy and avoiding claims in a year.
Improves Affordability
Policyholders who receive bonuses see a rise in their sum insured or a bonus amount added to their policy. This helps ensure appropriate coverage and manage the finances because of the escalating healthcare costs.
Encourages Loyalty
By rewarding people for their efforts to preserve excellent health, the Cumulative Bonus encourages loyalty between policyholders and insurers, encouraging people to remain loyal to their insurance company.
Promotes Long-Term Connections
Cumulative Bonus helps create long-lasting connections between insurers and insurance companies by encouraging policyholders to stay faithful and claim-free, which benefits both sides.
Encourages Preventive Treatment
By accumulating cumulative bonuses, policyholders are motivated to choose preventive treatment, leading to improved health outcomes, fewer medical claims, and decreased healthcare expenses.
Cumulative Bonus with Digit’s Health Insurance Plan
So far, you might have understood what a cumulative bonus in health insurance is and how it works. With other insurance providers, you can get a cumulative bonus either by getting a discount on premiums or a bonus on the sum insured, which is around 5 to 50% only.
But with Digit, you can be rewarded with a 50% increase in Sum Insured for every claim-free year, up to a maximum of 100%, i.e. when you don’t claim for two consecutive years. Amazing no!? 😁
Let’s understand the cumulative bonus in Digit’s health plan.
What is the Limit of Cumulative Bonus at Digit?
The Cumulative Bonus limit can vary from company to company. However, Digit provides a maximum 100% bonus in our health insurance policy.
Here is a table to help you understand the Cumulative Bonus as per Digit’s Health Insurance Policy:
Benefits of Cumulative Bonus in Health Insurance Plan
A cumulative bonus does not only benefit in terms of the increased sum insured. There are several other benefits of having a cumulative bonus, which includes:
- You will either get a discount on your premium or have more money as part of your insured sum.
- You can save money upon renewal by getting more coverage at the same premium.
- For some plans, you can continue to accumulate your cumulative bonus for up to 10 years.
- If your hospital bills are low, you can pay them yourself and make the most of the cumulative bonus.
- It motivates you to maintain your health and steer clear of medical bills.
- It improves financial protection, which might benefit when the actual costs exceed the usual coverage limit.
P.S: Always remember to renew your health insurance policy on time to avoid the cumulative bonus expiration. After all, it comes as a reward for staying healthy.
What Happens to Your Cumulative Bonus After Making a Claim?
If you claim after receiving one or more cumulative bonuses, you will lose the advantage of the previous year's cumulative bonus under the health insurance policy.
For example, if you have accrued a total of 30% bonus on your sum insured over three years and your plan provides a 10% increase in the sum insured amount for each year without a claim, then if you file a claim in the fourth year, your sum insured will drop by 10%.
Difference Between Cumulative Bonus and No Claim Bonus in Health Insurance
Some might confuse a cumulative bonus with a no-claim bonus, but they are not the same. Some insurers use the term’ no claim bonus’ for ‘cumulative bonus,’ but they have different meanings. Let’s understand the main difference between a cumulative bonus and a no-claim bonus:
In the world of health insurance, the cumulative bonus is a win-win feature that rewards you for prioritizing your health. Ensuring you remain claim-free enhances your coverage and offers peace of mind for the future.
After all, a little bonus can go a long way in securing your well-being!
Explain it like I'm five
We're making insurance so simple, now even 5-year-olds can understand it.
Maya loves eating chocolates every day. Her parents tell her that if she goes without eating chocolates for a week, she will get a truffle cake and also, her favourite choco-bar every Sunday. Her parents’ offer is just like the cumulative bonus in health insurance.