Understand what No Claim Bonus in Health Insurance really means, its risks, and why you shouldn’t rely on it as permanent coverage. Simple guide with examples.
When we talk about health insurance, most of us focus on things like premium, network hospitals, or claim settlement ratio. But one term that often excites policyholders is No Claim Bonus (NCB). Many people see NCB as a “reward” for staying healthy and not using their policy in a year.
But there’s a common misunderstanding here – many assume that this bonus becomes a permanent part of their coverage, and that can lead to serious issues later. In this post, let’s dive deep into what NCB really means, why it should not be treated as guaranteed coverage, and how to plan your health insurance accordingly.
No Claim Bonus in Health Insurance: Don’t Rely on It!
What is No Claim Bonus (NCB) in Health Insurance?
No Claim Bonus is a benefit given by insurance companies if you don’t make a claim in a policy year. Instead of giving you cashback or discounts, insurers usually reward you by increasing your sum insured without increasing your premium.
Two common types of NCB:
- Cumulative Bonus
- Your base sum insured increases by a fixed percentage (like 10% or 20%) every claim-free year.
- Usually capped (e.g., up to 50% or 100% of base sum insured).
- Discount on Renewal Premium
- Instead of increasing the coverage, some policies reduce your premium for the next year.
In India, cumulative bonus is more commonly used in retail health insurance. For instance:
If you have a Rs.5 lakh health cover and get a 20% NCB every year, after 3 claim-free years, your total coverage becomes Rs.8 lakhs (Rs.5 lakhs base + Rs.3 lakhs NCB).
The Common Misconception: Treating NCB as Guaranteed Coverage
Many policyholders think the NCB addition is just like the base sum insured — fixed and permanent. But that’s not true.
NCB is conditional. It stays only as long as you don’t make a claim.
Once you file a claim, the NCB reduces or vanishes depending on the policy terms.
Example:
Let’s say:
- Base Sum Insured: Rs.5 Lakhs
- NCB Accrued over 2 years: Rs.2 Lakhs
- Total Cover: Rs.7 Lakhs
Now, if you claim Rs.1 lakh in the current year, your NCB may reduce or reset. So, next year your cover may drop to just Rs.5 or Rs.6 lakhs — not the Rs.7 lakhs you thought you had.
This is where the real problem begins — people assume they’ll always have Rs.7 lakhs and don’t upgrade their base cover. When a big medical emergency strikes, they face underinsurance.
No Claim Bonus is a floating benefit. It is not guaranteed. If you rely on the NCB to plan your medical expenses or choose a smaller base sum insured thinking NCB will cover you, you’re exposing yourself to unnecessary financial risk.
Even the Insurance Regulatory and Development Authority of India (IRDAI) clearly mentions in its consumer education materials that:
“Cumulative Bonus is a reward and may reduce in case of claim.”
Why You Shouldn’t Depend on NCB for Long-Term Health Planning
Let’s understand this with a simple real-life situation:
Case Study:
Mr. Rajesh, 40 years old, took a health insurance plan with Rs.5 lakh sum insured and a 20% NCB clause. After 3 claim-free years, his coverage reached Rs.8 lakhs. He felt confident that Rs.8 lakhs was good enough.
In the 4th year, he was hospitalized for an emergency surgery costing Rs.6.5 lakhs. The insurer paid the entire claim from his policy (base + NCB).
But next year, his bonus reset. His policy cover dropped to Rs.5 lakhs again.
Now imagine if he needed a second surgery or a follow-up procedure in the same year or next year? He’d be short of funds.
He now had to either pay from his pocket or rush to buy a top-up cover (which could be costlier due to age and claim history).
Problems That Arise When You Rely Too Much on NCB
1. False Sense of Security
You may feel your policy is sufficient when NCB is at its peak. But NCB is not a guaranteed benefit. One claim can pull it back to zero.
2. Delayed Upgrade Decisions
People avoid increasing their base sum insured because NCB makes it look like their cover is growing. But this is temporary. It delays your decision to buy top-ups or add-on covers, which can prove costly later.
3. Reduced Coverage When You Need It Most
Medical conditions often strike in patterns — first a major event, then follow-ups, complications, rehab, etc. If your NCB gets consumed in the first round, you may not have enough for the next.
4. Avoiding Claims Just to Retain NCB
Some people hesitate to file even small claims, fearing NCB loss. But insurance is meant to reduce your out-of-pocket burden. Delaying treatment or paying unnecessarily just to retain bonus is a poor strategy.
What Should You Do Instead?
Here’s a more balanced approach:
1. Base Your Planning on Base Sum Insured
Always evaluate your health insurance adequacy based on the base sum insured, not with NCB additions. If your base sum insured is ?5 lakhs, plan as if that’s your actual protection — NCB is a bonus, not a shield.
2. Consider Super Top-Up Plans
Buy a super top-up health policy with a high deductible (say Rs.5 lakhs) and an additional cover of Rs.10–25 lakhs. These are affordable and offer better protection than relying on unpredictable NCB.
3. Use Riders Like NCB Protection (If Needed)
Some insurers offer riders that protect your NCB even if you make a claim (up to a limit). Evaluate them carefully — they come at a cost but can help if you want to maintain your coverage buffer.
4. Don’t Hesitate to Use Your Insurance
If there’s a legitimate need to claim, go ahead. NCB is just an add-on — your health and finances are more important than preserving a bonus.
Final Thoughts: NCB is a Reward, Not a Guarantee
No Claim Bonus is an attractive feature, but it should not distort your understanding of your actual insurance coverage. It is temporary, conditional, and revocable.
Make sure you buy health insurance with a sufficient base sum insured, and use NCB only as a bonus. Never build your healthcare plan around a benefit that disappears the moment you actually need your insurance.
Remember, health insurance is not just about saving money when you’re healthy — it’s about protecting your wealth when you’re not.
Leave a Reply