What exactly is cumulative bonus in my health insurance policy?

The increase in unhealthy lifestyle & cost of medical care has made health insurance an absolute necessity in today’s time. This has led more and more individuals to buy health insurance. However, most individuals want an affordable premium but also want the highest possible sum assured. Of course, the basic structure of insurance does not allow buyers to buy health insurance with high sum assured unless they are willing to pay higher premium amount. There is a solution to this problem – it is known as cumulative bonus. In this article we discuss cumulative bonus and the best way to avail it:

   

         

·        Cumulative bonus in a health insurance policy is the reward provided by the insurance company. This reward is provided at the time of renewal in form of increase in the sum assured or decrease in the premium amount. The extent of this reward differs from one insurance company to the next but it is generally 5 to 10 percent hike in sum assured/drop in premium amount.

This rewarded is provided to you provided that you do not make a claim during the policy tenure. Therefore, you will receive this benefit for every claim-free year. The insurance companies can increase the sum assured/lower the premium amount up to 50% in this way with each renewal. The percentage of sum assured increased with each renewal is dependent on the insurance company and may vary and buyer is advised to be aware about it when he decides to buyhealth insurance.

·        In case, the policyholder makes a claim during the policy term, the cumulative bonus decreases by some percentage depending on the insurance company’s rules and regulations. For example, if the original sum assured is 5 lakhs, which increased to 5.5 lakhs because of 10% cumulative bonus for one claim free year. If a claim is made the next year, then the insurance company may reduce cumulative bonus by 5% of original sum assured and so, the policyholder’s sum assured will become 5.25 lakhs in next year. This can again increase if the buyer does not make any claim.

·        An added advantage of the cumulative bonus feature is that it is retained even in the case when the buyer ports his/her insurance policy from one insurance company to another. Of course, the new insurance company may have their own policy when it comes to cumulative bonus and so, the percentage increase in the sum assured may vary during porting. It is therefore advisable to inquire and be aware about the policy of the new insurance company when it comes to the part of cumulative bonus before you switch or buy health insurance.

·        The best way to avail this benefit of cumulative bonus is of course to buy health insurance as early as possible during your youth. As the possibility of a health related emergency is low during this time, the buyer is more likely to have a claim free year during this time in his or her life. This will help the buyer later on when they reach a certain age where they will benefit from the increased sum assured.

So, as we saw in this article, cumulative bonus is an important parameter when one decides to buy health insurance or even while porting health insurance from one insurance company to another. We hope this article was helpful to you and helped you to decide better when you buy health insurance. Have a great day!