According to a survey conducted by the World Health Organisation (WHO) in 2011, India spends only 3.9% of its GDP on the health sector, the lowest of all the BRICS nations (Brazil, Russia, India, China and South Africa). Of the 3.9%, 5-10% comes from personal health insurance accounts, while employers provide over 9% of the cover, and an astounding 82% of the people pay for their healthcare out of their own pockets.
Here is a statistic that depicts where India stands amongst other BRICS nations.
Of the people who have insurance, there are plenty who have accrued no-claim bonuses over the years, which they stand to benefit from.
But what is a No-Claim Bonus in layman’s terms?
A no-claim bonus (NCB) is basically a count of the number of years in which you haven’t made a claim on your health insurance policy. It simply means, when you don’t make a claim in a policy year, the insurer rewards you with a no claim bonus. The worth of a NCB typically varies from person to person and can give you 60-75% discounts on your subsequent premiums.
How Does My No Claim Bonus Work?
The Insurance Regulatory and Development Authority announced a new set of guidelines in its health insurance regulations in 2013. The guidelines stated that in the event of a claim, the no-claim bonus racked up over the years will not go down to zero, instead the bonus will be decreased at the exact rate it was accrued at.
Insurers need to offer a bonus on your new indemnity-based insurance policies, and they need to specify them in the fine print issued at the time of renewal.
Let’s elaborate this with the help of a simple example.
You have taken a health insurance policy of INR 10,00,000 for the last 10 years and have never made any med claims. You get a bonus of 5% each year for not making any claims and have accumulated over 50% over the course of the decade, which adds up to INR 5,00,000.
However, on the eleventh year, you fall ill and make a claim of INR 1,00,000 to pay for your hospital and treatment expenses. Under the old guidelines, your bonus would have come down to zero for making a claim.
But, as the new guidelines have kicked in, your NCB will only be reduced by 5%—from 50% to 45%. This also means that you can claim a deduction of 45% on your insurance premium from the next year.
No-Claim Bonus Is Yours
The most important feature of a no-claim bonus is that it is associated to the individual.
This means that you would retain the benefits even if you switch from your existing insurance plan to a different one. The bonus will remain even if you decide to port your health insurance policy to a different insurer.
Another important aspect of this deal is that you can’t transfer this bonus to a different person, except if the policy also has a few other family members or heirs attached to it.
The Maximum NCB You Can Rack Up
Ideally, the maximum no-claim bonus you’re entitled to is up to 50%. This means that once you have accumulated 50% on bonus, your discount will not increase any further even if you do not make any claims over the subsequent years.
There are a few exceptions to this rule though. People who have renewed their policies between July 1, 2002 and June 30, 2003 and had racked up over 55% to 65% as per tariff before July 1, 2002, are allowed to claim until there is a claim left for them to make. After this, their bonus will come down to zero and the current NCB rules will come into play after their renewal.
As you might already know, health insurance is absolutely essential, especially in the current scenario where healthcare costs are rising significantly by the day. This article teaches you some of the few basic things you will need to know about a no-claim bonus, and how it can help you save money when you opt to renew your existing insurance policy.