Health insurance: Choose policy with guaranteed bonus, unaffected by claims

With medical inflation at around 15 per cent annually, one way customers can mitigate rising costs is by opting for policies with attractive bonus features. A bonus is an additional sum insured that insurers offer policyholders.

 

“By offering a bonus, insurers incentivise customers to stick to them,” says Siddharth Singhal, head of health insurance, Policybazaar.

 

While premiums may rise over time, a good bonus-linked policy lowers the per lakh cost of sum insured.

 

Types of bonuses

 

Bonuses come in three forms. A no-claim bonus (NCB) increases the sum insured if no claim is made. If a claim occurs, the bonus is not added that year, and the accumulated amount may reduce.

 

The second type adds an NCB for claim-free years, but does not reduce the accumulated bonus if a claim is made.

 

The third is a guaranteed bonus, where a bonus accrues annually regardless of claims and remains unaffected by payouts. “This approach is gaining momentum as it counters inflation effectively,” says Ashish Yadav, head of products and operations, ManipalCigna Health Insurance. 

 

Bonus accumulation and limits

 

Insurers outline their bonus accrual rate and maximum ceiling for accrual in their policy terms.

 

According to Yadav, annual bonuses nowadays range from 5 to 100 per cent, while accumulation caps vary from twice the sum insured to being unlimited. “Most policies offer 20-50 per cent annual bonuses, typically capped at 100 per cent,” says Kapil Mehta, co-founder, SecureNow.

 

Certain insurers offer riders to accelerate bonus growth. “If your base plan provides a 50 per cent bonus, with a bonus booster rider it could grow by 100 per cent annually, with no cap,” says Singhal.

 

Impact of claims

 

In some policies, a claim reduces the accumulated bonus at the same rate at which it accrued. “If a policy offers 100 per cent accrual each year and a customer has two claim-free years, 200 per cent gets added as a bonus to the sum insured. A claim in the third year prevents further accrual and reduces the bonus to 100 per cent. A claim in the fourth year brings the bonus amount to zero,” says Singhal.

 

Choosing a bonus-linked policy

 

First, choose a high base sum insured. “A decade ago, medical inflation was 5-7 per cent. Now, it exceeds 15 per cent and may rise further. Treatment costs are increasing due to advancing medical technology. A base sum insured of ₹50 lakh-₹1 crore is essential, followed by a policy with a strong bonus structure,” says Yadav. He adds that the base sum insured should cover most healthcare costs, while the bonus should take care of inflation.

 

Yadav suggests choosing a policy that guarantees a 50-100 per cent annual bonus, which does not get reduced after a claim. “Without this, the core need of managing inflation will remain unmet,” he says. Avoid policies that discourage claims through restrictive bonus structures.

 

Some customers in older policies do not receive any bonuses despite not claiming. “The policy probably does not have the bonus feature. Such customers should port to a policy that has this feature,” says Mehta.