No Claim Bonus: The Discount Most Policyholders Never Fully Use
Most Indian health insurance policies increase the sum insured by 10-50% for each claim-free year, up to a cap. It sounds like a small perk. Over 5 claim-free years, a ₹5 lakh policy can grow to ₹10 lakh without any premium increase. Understanding the bonus structure changes how you think about small-claim decisions — sometimes not claiming is worth more than the claim itself.
How the bonus scales
- Year: Year 1 · Bonus (typical 20% policy): 0% · Effective sum insured on ₹5L base: ₹5,00,000
- Year: Year 2 (no claim) · Bonus (typical 20% policy): 20% · Effective sum insured on ₹5L base: ₹6,00,000
- Year: Year 3 (no claim) · Bonus (typical 20% policy): 40% · Effective sum insured on ₹5L base: ₹7,00,000
- Year: Year 4 (no claim) · Bonus (typical 20% policy): 60% · Effective sum insured on ₹5L base: ₹8,00,000
- Year: Year 5 (no claim) · Bonus (typical 20% policy): 80% · Effective sum insured on ₹5L base: ₹9,00,000
- Year: Year 6+ (no claim) · Bonus (typical 20% policy): 100% cap typical · Effective sum insured on ₹5L base: ₹10,00,000
What happens when you claim
- Most policies: bonus resets to 0 or drops by 10-20%.
- Some 'no bonus loss' policies: bonus preserved even after a claim (costs 5-15% more premium).
- Super top-up plans: separate bonus tracking often applies.
The specific small-claim math
A ₹8,000 outpatient procedure with a ₹1L bonus-worth per year: claiming saves ₹8K but costs ₹1L of future coverage. The math flips only if you expect to use the coverage soon. For most families, small claims are worth paying out-of-pocket to preserve the bonus stack.
Rules that vary by insurer
- Some reset bonus fully on any claim; others reduce by one year.
- Some apply bonus only to base sum insured; others include it in every calculation.
- Some cap bonus at 50%, others 100%, a few 200%.
- Some carry bonus across policy changes within the same insurer.
- Portability across insurers: continuity of waiting periods, usually not bonus.
The strategic decisions
- Set an 'internal threshold' — claim only if cost exceeds ₹15,000-25,000.
- Use OPD cover (separate from hospitalisation) for smaller items.
- Use tax benefit under 80D for out-of-pocket medical spends.
- Understand your policy's specific reset rule at purchase.
- Check whether a 'no bonus loss' rider is available.
Portability considerations
If moving from one insurer to another, waiting periods and pre-existing coverage carry over. Bonus usually does not. If sitting on a large accumulated bonus with an insurer whose service has degraded, the calculation is real: how much bonus are you giving up vs how much better service you'd get. Some insurers now port bonus too — ask specifically.
What to record
- Current bonus percentage.
- Rule for reset on claim.
- Effective sum insured this year.
- Any claim history and impact on bonus.
The bonus is often the single most valuable feature of a long-held policy. Losing it to a claim that could have been paid out-of-pocket is a common Indian insurance mistake.
References
Free for 90 days, no card needed. After that, keeping the record costs ₹349 for the year.
General information, not medical advice. Always talk to a qualified doctor about your own care. Where this and your doctor disagree, your doctor is right.