Medical Insurance: What is Cumulative Bonus and how does it work? Skdknews

 Medical Insurance: What is Cumulative Bonus and how does it work? Skdknews

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Medical insurance

If you have bought a medical insurance policy and want your sum insured to increase over the years, you can look for an insurance policy that offers an embedded incremental bonus.

   However, it is important to note that cumulative bonus is different from the no-claim bonus feature which is generally offered to the insured if he does not make any claims during the policy year.

   So let's first understand what it actually is.

What is cumulative bonus?
Cumulative bonus refers to a financial benefit that is added to the sum assured at the beginning of each policy year.

   Since the bonus is cumulative – it adds up for every year regardless of whether it is claimed or not.  This incremental bonus is available for individual and family floater policies.  Generally, insurers offer a 5 to 50 percent increase in the principal sum insured for each year.

The insurance policy may specify a maximum limit on the cumulative bonus amount.

    Let us understand this with an example.  Suppose Ravi Kalra has an insurance policy of ₹10 lakh and he gets this insurance cover in the first year.  If the policy is entitled to a 20 per cent increase in the sum assured, the policy sum becomes Rs 12 lakh in the next year.

    Next year also - the sum insured will increase by Rs 2 lakh, thus the total sum insured will increase to Rs 14 lakh.

    “Insurance companies today offer new-age products with incremental bonus features, where policyholders can easily increase their sum insured irrespective of claims during the policy year.  Choosing the right sum assured is often a dilemma among policyholders, especially in times of rising medical inflation and health uncertainty.  Here, the incremental bonus feature proves to be an added advantage for your health insurance policy.

    On the other hand, no-claim bonus is given only as an incentive for not making an insurance claim during the policy year.

    Apart from increasing the sum insured, there is another way insurers can encourage policyholders to avoid claims – discounting the insurance premium without changing the sum insured.

    The underlying idea behind increasing the sum assured along with discounting the premium is to encourage fewer claims.

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