What is Cumulative Bonus In Health Insurance: Meaning, Features & Benefits

Onsurity Editorial
February 21, 2025
8 min read

Table of Contents

Health insurance is an essential tool for financial planning, even when you are in your prime and physically fit. It is, in fact, far more beneficial to get health insurance when you are in your 20s. For one, the premium doesn’t cost as much. Secondly, it protects you from the unpredictability of life. You may even ask why to spend Rs. 5,000 to Rs. 8,000 on an insurance policy that may not even get utilised making it an unnecessary expense to incur.

The answer is Cumulative Bonus. It is one of the most attractive benefits of getting health insurance. For every year you don’t make a medical claim, you get rewarded a cumulative bonus.

Due to the rising cost of healthcare and medical inflation, health insurance premium costs tend to go through a year-on-year increase. However, buying it at a young age is relatively more cost-effective. Additionally, buying it when you are young and fit means fewer or no medical claims. Most insurance providers in India offer cumulative bonus to policyholders for not making any claims during the policy period. This feature can help enhance your policy benefits and offset the premium hikes.

Read on as we help you understand the importance and benefits of cumulative bonus in health insurance and how you can make the most of this feature.

What Is A Cumulative Bonus In Health Insurance?

As mentioned earlier, a cumulative bonus is your insurance provider’s way of incentivising a claim-free policy year. The bonus is generally offered as an increment in the sum insured and the bonus rate ranges from 5% to 50% or till it matches the initial amount of the sum insured.

The cumulative bonus is beneficial for both – the policyholder and the insurance provider. Due to the lucrative nature of cumulative bonus, most policyholders tend to refrain from making petty claims against their policy and tend to instead accumulate the bonus. And when the policyholder doesn’t make an insurance claim, it benefits the insurance provider by reducing their financial obligations.

Also read: Waiting Period in Health Insurance

Types Of Cumulative Bonus In Health Insurance

Different insurers have different terms and conditions on how they choose to reward the policyholder for a claim-free year. However, mentioned below are the two main ways cumulative bonus gets rewarded:

1. Increase in Sum Insured

In this case, the insurance company increases your coverage amount also known as the sum insured. This increase in the sum insured doesn’t increase your premium cost.

For example, if you get a policy with a coverage amount of Rs. 5 lakh and your insurer adds a 10% cumulative bonus on this, your sum insured will increase to Rs. 5.5 lakh. However, this increment is capped once your bonus reaches 50% or 100% of the original sum and this capping varies from insurer to insurer.

2. Discount on Premium

The alternative way is when the insurance provider opts to offer a discount on the renewal premium for every claim-free year. In this case, your sum insured doesn’t change but your premium cost goes down. Capping on discounts may vary depending on the terms and conditions laid by your insurance provider. We strongly advise you to review them carefully.

Suggested read: Copay in Health Insurance

How Does a Cumulative Bonus Work in Health Insurance?

Cumulative bonus plays an important role in promoting a healthy lifestyle, enhancing health insurance affordability, fostering policy continuity, and ensuring the long-term effectiveness of your insurance policy. Let’s dive deeper into the workings of this benefit with the help of a real-time scenario.

Let’s assume you took out a policy with a sum insured of Rs. 5 lakh and see how the cumulative bonus impacts your policy under different scenarios.

Scenario 1: Increase in Sum Insured (For 5 Consecutive Claim-Free Years)

If you opt for a policy with a increase in the sum insured as the cumulative bonus reward and do not make a claim for 5 consecutive years then this is what will happen to your coverage:

Year	Sum Insured (in lakhs)	Cumulative Bonus	Revised Sum Insured
1	5	10%	5 lakhs + 50,000 = 5.5 lakhs
2	5.5	10%	5.5 lakhs + 50,000 = 6 lakhs
3	6	10%	6 lakhs + 50,000 = 6.5 lakhs
4	6.5	10%	6.5 lakhs + 50,000 = 7 lakhs
5	7	10%	7 lakhs + 50,000 = 7.5 lakhs

In this case, the cumulative bonus was offered at a fixed rate and capped at 50% of the original sum insured.

Scenario 2: Making a Claim in the 6th Year

While there is an upper limit on the sum insured amount, there is no specific time period up to which policyholders can continue to reap cumulative bonus rewards. So, if you make a claim in the 6th year, your insurer may reset the cumulative bonus, reduce it, or even completely remove it.

Scenario 3: Premium Discount Option

Some insurers offer a discount on premiums instead of increasing the sum insured, so if you select a policy offering premium discounts, you won’t get an increased sum insured instead you will pay a lower premium upon the policy renewal.

For example – if your policy (sum insured: Rs. 5 lakhs) costs you Rs. 5,000 and the cumulative bonus is 10% off on the premium then your renewed premium cost will be Rs. 4,500.

Quick read: Pre-existing Disease in Health Insurance

What Are The Benefits Of Cumulative Bonus?

1. Higher Coverage Without Additional Cost

One of the main benefits of a cumulative bonus reward is that you get a higher sum insured at no additional cost. This means that you get to derive more value out of your coverage at the original premium cost even at the time of policy renewal.

2. Encourages a Healthy Lifestyle

Cumulative bonus makes it more rewarding to not make smaller claims and this is why policyholders are often motivated to pursue a healthier lifestyle. Adopting well-being and preventive care not only saves you from incurring medical expenses but also helps improve your overall quality of life.

3. Financial Security for Future Medical Needs

With the rising healthcare costs, having a higher sum insured at an affordable premium makes unforeseen situations more manageable and provides better financial security. More claim-free years means a higher coverage amount. Better coverage ensures your preparedness for future uncertainties.

4. Long-Term Savings

By maintaining a claim-free record and availing cumulative bonuses, you can save on additional top-ups or policy upgrades that you may otherwise need.

5. Beneficial for Senior Citizens

Senior citizens are more likely to benefit from accumulating cumulative bonuses as they are at high risk of hospitalisation and critical illnesses. They can certainly make use of an increased sum insured in a medical emergency.

6. Useful for Family Floaters

Family floater plans generally lack adequate coverage or come with a higher premium. So, if you purchase a family floater plan and the cumulative bonus gets accumulated as no family member makes a claim for at least 2-3 consecutive years then you and your family can get the adequate coverage amount eventually. This is why a cumulative bonus is particularly more rewarding for family floater policies.

Recommended read: What is Hospital Cash Insurance?

Difference Between No Claim Bonus And Cumulative Bonus

The terms “Cumulative Bonus” and “No Claim Bonus” have often been used interchangeably. However, there are certain differences between the two, we have enlisted them below for your reference:

Feature	Cumulative Bonus (CB)	No Claim Bonus (NCB)
Common in	Health Insurance	Motor Insurance
Impact of Claims	Sum insured may reduce or reset	Discounts may be reduced or lost
Effect on Premium	No effect	Reduction in Premium
Maximum Limit	50%-200% of Sum Insured	Usually 50% of Premium

Factors Affecting Cumulative Bonus in Health Insurance

Several factors influence the cumulative bonus in health insurance. Here are the key ones:

1. Claim History

If you make a claim during the policy year, the cumulative bonus may be reduced or reset to zero, depending on the insurer’s terms. Some policies allow partial retention of the bonus even after a claim.

2. Maximum Limit (Capping)

Most insurers cap the cumulative bonus at 50%-100% of the original sum insured. Once you reach the maximum limit, no further bonus is offered, even if you continue having claim-free years.

3. Policy Renewal on Time

If you fail to renew your policy on time, you may lose your accumulated bonus. Some insurers provide a grace period (e.g., 30 days), but any lapse beyond this period can result in a loss of cumulative bonus. However, most insurance providers offer to reset the bonus if the maximum limit is not reached.

4. Type of Cumulative Bonus

As mentioned above, some insurers offer cumulative bonus either as an increased sum insured or as discounts on premiums. The impact of claims and policy terms vary based on the type of bonus offered in the health insurance policy.

5. Portability

If you switch insurance providers, the new insurer may not transfer your cumulative bonus or may offer only partial credit. It’s essential to check portability benefits before switching.

6. Changes in Policy Terms

Insurers may revise bonus terms at renewal, so it’s important to read policy updates. Some insurers may even modify the bonus percentage or claim impact during policy upgrades.

Also read: Daycare Treatment in Health Insurance

Easy Lifestyle Hacks to Ensure a Claim-Free Policy Year

Keeping your health in check can help you avoid hospitalisations, maximize your cumulative bonus, and maintain a claim-free policy year. Here are some easy and doable lifestyle hacks:

1. Preventive Care: You can make a habit out of frequently monitoring your vitals at home and at least get a health checkup done once a year. This can help with early detection and reduce risks associated with hospitalisation. Additionally, you should stay up to date on your vaccination schedule to prevent unforeseen health scares.

2. Maintain a Healthy Diet: You are what you eat so try to avoid processed and junk food that lead to lifestyle diseases. Make sure to stay hydrated and have at least highly nutritious meals every day.

3. Stay Active: If you haven’t already caught the fitness bug then this is your cue to start exercising for at least 30 minutes every day. A sedentary lifestyle can put you at high risk of diseases. By staying fit and active you can also prevent obesity (the most common factor behind cardiovascular diseases).

4. Mental Wellness: Most working professionals experience mental issues like stress, anxiety, and burnout. When these symptoms go unchecked for long, they tend to leave an impact on physical health also. So, make sure to practice mindfulness, meditation, and mental wellness as often as you can.

Learn how to optimise your health and health insurance for the best outcomes with Onsurity.

FAQs

1. How is a cumulative bonus in health insurance calculated?

Cumulative Bonus is typically calculated at a fixed rate for every claim-free policy year. It can either increase your sum insured (most common) or provide a premium discount upon renewal.

2. Is there a cap on cumulative bonus?

Yes, there is a cap on cumulative bonus. Once the limit is reached either 50% or 100% of the original sum insured (depending on the insurance provider), the cumulative bonus rewards stop accumulating even if you continue to have a claim-free policy year.

3. Is there a difference between a cumulative bonus and a no-claim bonus?

Although used interchangeably, both cumulative bonus and no claim bonus have slightly different applications. While the former is rewarded as a discount on the premium, the latter is given as an increment in the sum insured.

4. Where can I utilise the cumulative bonus?

Cumulative bonus is offered in both individual and family floater health insurance policies but offers more utility for young families and individuals as they tend to accumulate the benefits for longer periods.

5. Can a cumulative bonus be transferred to another insurance provider?

Portability of cumulative bonus is highly subjective as it depends on the insurance provider’s policy terms and conditions. You can still opt for a policy that offers the portability option for cumulative bonus.

6. What happens to the cumulative bonus when a claim is raised?

Most insurance providers either reset the bonus or reduce the sum insured when a claim is raised during the policy period.

7. Will the cumulative bonus be lost if the policy renewal is delayed?

If there are any lapses in policy renewal then chances are that you lose your cumulative bonus. However, many insurance providers offer a grace period to policyholders within which if you renew your policy then you won’t lose your bonus.

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