What is NCB in Insurance?NCB in insurance stands for No Claim Bonus. No Claim Bonus is one of the many benefits that the insurer is entitled to as part of the stipulated insurance plan.
Insurance covers are bought with a motive to gain protection against specific risks. In the event of a contingency where a claim is made, the loss suffered or expense incurred shall be (partially or entirely) compensated by the insurer.
No Claim Bonus is the amount rewarded to the policy-holder by the insurance company in case no claim is made in any financial year covered by the policy.
No Claim Bonus in Health InsuranceNo Claim Bonus in the health insurance sector also functions similarly. Sometimes, hospital expenses may not be substantial, and the insured individual may choose to make out-of-pocket expenses instead of invoking the insurance policy. No Claim Bonus is offered to a policy-holder in the event that no claims were made during the period of the health insurance policy.
The quantum or rate of No Claim Bonus is pre-specified in the policy contract. Such bonus is also transferable to another medical policy purchased from a different insurer.
Types of No Claim BonusThe benefits of No Claim Bonus may be availed by two methods. The method applicable to your insurance policy shall be stipulated in the policy contract. The two types of NCBs are-
- Discount on Premium: Here, the No Claim Bonus is not rewarded in the form of a monetary payout but instead treated as a discount on the amount of premium. The bonus sum is settled by netting off the amount of premium that an individual owes to the insurance company.
- Cumulative Benefit Method: Under this method, the NCB is accumulated in the policy and added to the amount of sum assured, subject to a maximum upper limit (usually 50% of the assured sum). In order to avail this benefit, it is essential to renew the insurance plan on time.
How Does No Claim Bonus Work?Let us understand with the help of an example, how No Claim Bonus works-
Insured Individual: Mr K
Policy Details: Health insurance policy of INR 5 lakh with a No Claim Bonus rate of 6% offered as part of the sum assured
Suppose, if during the first year of the policy tenure, no claim was made by Mr K, the sum assured would automatically become INR 5.3 lakh (five lakh plus twenty thousand worth of NCB). If in the second year as well Mr K made no claims, the sum assured would increase to INR 5.6 lakh. However, such increments are subject to a maximum limit, depending on the terms of the policy.
Thus, No Claim Bonus in health insurance plans is a win-win for both the insurer and the insurance company as it encourages and rewards policy-holders for prioritising their healthcare while minimising cases of fake and unnecessary claims.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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