You have a ₹10 Lakh health insurance policy. You haven't made a claim for 2 years, so your coverage has grown to ₹15 Lakhs thanks to the Cumulative Bonus (NCB).
Suddenly, you get hospitalized for food poisoning for 24 hours. The bill is ₹8,000.
You think, "I pay premiums, so I should claim this."
This is a mathematical disaster.
By claiming that ₹8,000, you might trigger a reduction in your coverage that costs you ₹2 Lakhs to ₹5 Lakhs in future protection. Here is why smart investors pay small bills from their own pockets.
Disclaimer: NCB rules vary. Some modern policies (like Niva Bupa ReAssure) don't reduce the bonus on claims up to a limit. Check your specific "Bonus Protection" clause.
Don't Claim ₹5,000 for Viral Fever!
1. What Is Cumulative Bonus (NCB)?
To reward you for staying healthy, insurers increase your Sum Insured for every claim-free year, without increasing your premium.
- Typical Rate: 10% to 50% increase per year.
- Maximum Limit: Usually up to 100% (Double the base cover).
Example: You buy a ₹10 Lakh policy.
Year 1 (No Claim): Cover becomes ₹15 Lakhs (+50%).
Year 2 (No Claim): Cover becomes ₹20 Lakhs (+100%).
You are essentially getting ₹10 Lakhs of extra insurance for FREE.
2. The "Penalty" for Claiming
The moment you file a claim—even for ₹1—the insurer reduces your bonus in the next renewal.
- The Hit: Your Sum Insured drops by the same percentage it rose (e.g., -50%).
- The Math: If your cover drops from ₹20 Lakhs back to ₹15 Lakhs, you just lost ₹5 Lakhs in coverage potential.
⚖️ The Comparison
- You Gain: ₹8,000 (reimbursement for food poisoning).
- You Lose: ₹5,00,000 (Insurance coverage for a future heart attack or cancer).
Is it worth trading ₹5 Lakhs of safety for ₹8,000 cash? No.
3. When Should You Pay from Pocket?
Use this simple "10% Rule" to decide.
- If the claim amount is less than 10-15% of your potential Bonus Loss, DO NOT claim. Pay it yourself.
- If the claim is large (e.g., ₹50,000+), go ahead and claim. The insurance is meant to be used for big events.
4. The Exception: "NCB Protect" Riders
Some premium policies offer an add-on called "NCB Protect" or "Super NCB".
- Benefit: Your bonus does not reduce even if you make a claim (usually up to a certain limit or if the claim is small).
- Cost: It adds 5-10% to your premium.
If you have this rider, claim away! If not, be very careful.
5. Does It Affect "Portability"?
Yes. If you plan to switch insurers (Portability), your accumulated NCB is the most valuable asset you carry.
- Transferable: When you move from HDFC Ergo to Star Health, you can transfer your Sum Insured + NCB.
- Lost Opportunity: If you claimed that small bill and lost your NCB, you have less coverage to transfer to the new insurer.
Think Like a Risk Manager
Health insurance is for Wealth Protection (saving you from bankruptcy), not for Bill Reimbursement (paying for every pill).
Protect your Bonus like gold. It is the cheapest way to fight medical inflation. Don't sell it for peanuts.
Action Plan:
- Check your current policy: What is your accumulated NCB? (e.g., ₹5 Lakhs).
- Check the "Bonus Reduction" clause: Does it drop by 10%, 20%, or 50% upon a claim?
- Next time you have a small hospital bill (under ₹20k), do the math before submitting the claim form.
Helpful Resources:
IRDAI: Health Insurance Handbook
Acko: Guide to No Claim Bonus (NCB)
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