That difference matters when choosing a health insurance policy, because two plans with the same starting cover can end up far apart after a few healthy years. A smaller number of plans offer a premium discount instead of extra cover, so it helps to confirm which form the bonus takes before comparing quotes.
How the Bonus Builds Up
The bonus is set as a percentage of the base sum insured for every claim-free policy year. Rates commonly range from 5% to 50% a year, and most plans cap the total, often at 100% of the base cover, though some allow more. The bonus is added at renewal and is lost if the policy is allowed to lapse.
As an illustration, a ₹10 lakh policy earning 10% a year would offer ₹15 lakh of cover after five claim-free years, with the extra ₹5 lakh carrying no separate charge. A plan earning 50% a year would reach a 100% cap within two years. The actual rate and cap for any plan are set out in its policy wording.
What Happens After a Claim
A claim does not wipe out the bonus. IRDAI's guidelines allow the accrued cumulative bonus to be reduced only at the same rate at which it was earned. A policy that built up 30% at 10% a year would therefore drop to 20% after a claim year, not to zero. Some plans go further and leave the bonus untouched after a claim, or offer an add-on that protects it for an extra premium.
Insurers explain no claim bonus in health insurance in their product material, including any protection options. Since the reduction applies to the bonus rather than the base sum insured, the core cover bought at the start stays in place either way.
The Bonus on a Family Floater
On a floater, the bonus is added to the single shared sum insured. A claim by any member counts as a claim for the whole policy, so one child's hospital stay can reduce the bonus everyone relies on. Families with one member who claims frequently may find that a separate policy for that person helps the rest of the family keep building their bonus.
Should You Skip a Small Claim?
Take a ₹10 lakh plan earning 10% a year that has built up ₹1 lakh of bonus cover. A ₹15,000 hospital bill comes up. Claiming it would cut the bonus by one year's accrual, taking the ₹1 lakh of extra cover back to zero. Paying the bill personally keeps that ₹1 lakh in place.
The key point is that the bonus cover is only used in a year when hospital bills go beyond the ₹10 lakh base. For a family unlikely to face a bill that large, paying ₹15,000 to protect headroom they may never use is a poor trade. For a family with older members or a known condition, where a large claim is more likely, keeping the bonus has more value. Preventive health check-ups offered under a policy are generally not treated as claims, so using them does not affect the bonus.
Keeping the Bonus When You Switch or Renew
The bonus depends on continuous cover, so renewing on time is essential. Annual policies usually have a grace period of 30 days, and renewing within it generally keeps the accrued bonus. Depending on the plan, however, treatment taken during the grace period itself may not be covered, so it is safer not to rely on it. A lapsed policy typically loses the bonus altogether.
Under IRDAI's portability rules, a policyholder moving to a new insurer can carry the accumulated bonus across, subject to the new insurer's terms and underwriting. Asking for written confirmation of how the bonus will be credited avoids surprises after the switch. Changing the sum insured at renewal can also affect the bonus, since some plans recalculate it on the new base amount while others keep it tied to the original cover.
Where the Bonus Fits in Your Overall Cover
A no-claim bonus is a reward for claim-free years, and it cannot stand in for adequate base cover. It builds slowly, can shrink after a claim and disappears if the policy lapses, so buying a lower sum insured on the expectation that the bonus will fill the gap is risky. It also differs from a restoration benefit, which refills the sum insured after it has been used during a year, and from a top-up plan, which adds cover above a deductible.
The bonus works best as extra headroom on a policy already sized for the family's needs. Kept intact through a few healthy years, it can give that policy real depth for the year a large hospital bill finally arrives.
