No claim bonus

What is a no claim bonus in health insurance?

A no claim bonus (NCB) in health insurance is the reward an insurer gives a policyholder for a policy year without claims. It usually takes the form of a cumulative bonus, which adds to the sum insured at the next renewal without any extra premium, or a discount on the renewal premium. The bonus builds over successive claim-free years up to a cap set in the policy.

NCB is a loyalty and good-experience incentive. It is not a refund and cannot be taken as cash.

How no claim bonus works in India

IRDAI's Master Circular on Health Insurance Business (May 2024) says an insurer may reward claim-free policyholders with an NCB, so the benefit is optional for the insurer and its size is set in each product. Where it is offered, the NCB must be given at every renewal in the form the policyholder chooses or expressly consents to: a cumulative bonus, a renewal premium discount, or both.

Other rules protect the bonus once earned:

• Grace period. If the policy is renewed within the grace period (15 days for monthly premiums, 30 days otherwise), the accrued NCB is kept.
• Portability and migration. NCB is one of the credits that moves with the customer when the policy is ported to another insurer or migrated to another product of the same insurer.
• No individual claim loading. Under the IRDAI (Insurance Products) Regulations, 2024, renewal premium loadings for individual products must be applied at portfolio level, not because one policyholder claimed. Insurers may give individual discounts for good claims experience.

How products differ. The rate at which the bonus builds, the cap and what happens after a claim vary by product. In the standard Arogya Sanjeevani policy, the sum insured rises by 5% for each claim-free year, up to 50%, and after a claim the bonus is reduced at the same rate it was earned. Other plans offer faster accrual, higher caps, or a bonus that is not reduced after a claim, usually at a higher premium. Wellness rewards, which IRDAI allows for preventive and healthy habits, are separate from NCB and must be disclosed upfront.

Example: cumulative bonus over five years

Take a ₹5 lakh policy with a bonus of 10% of the base sum insured per claim-free year, capped at 50%, and reduced by 10% after a claim year. These numbers are illustrative; check the actual product.

What no claim bonus means for distribution

• Explain it as cover, not money. The bonus raises how much the policy will pay; the customer gets nothing in hand. Advisers who describe it as a "return" set up disappointment.
• Sell the base sum insured on its own merit. A ₹5 lakh policy that might grow to ₹7.5 lakh after five clean years is still a ₹5 lakh policy in year one, when a claim is just as likely. The adequacy conversation should be about the base cover.
• Show the post-claim rule. Whether the bonus falls after a claim, and by how much, is a real difference between products. It belongs in the comparison the adviser shows, alongside room rent limits and co-payment.
• Small claims trade-off. Some customers ask whether to skip a small claim to protect the bonus. A good adviser explains the arithmetic for that product: the bonus that would be lost against the amount of the claim, and the fact that bonus loss rules differ. The decision is the customer's.
• Use it at renewal. The renewal notice is the moment to show the customer the bonus earned. It is also a retention argument, since a customer who lets the policy lapse loses it, while one who ports keeps it.
• Floaters and member changes. In a family floater, the bonus belongs to the floater sum insured. When a member is split off into a separate policy, the policy terms decide how the bonus is apportioned; customers should be told before they split.

Health NCB vs motor NCB