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Difference Between No Claim Bonus and Restoration In Health Insurance

29 June 2022, 8:00 PM

The term ‘no claim bonus’ is commonly heard in health insurance. Similarly, you often get to hear about the restoration benefit as well. So are these the same features that allow you to get more value out of your health insurance policy cover? The answer is a big no! Sadly, many people do not understand the basic concepts associated with health insurance and so, they are unable to make the best use of the available features. If you find yourself in a similar situation, just take a look at this article and understand the concepts of no claim bonus and restoration benefit and how they differ from each other.

Understanding No Claim Bonus in Health Insurance

Let us begin by understanding the concept of no claim bonus, or NCB as it is better known, in health insurance:

  1. Rationale -The rationale behind NCB in health insurance is quite simple to comprehend. The health insurance provider doesn't appreciate too many claims to be made in a year. To ensure not every small medical expense is reimbursed , the insurer offers a reward for those who do not make even a single claim in the year. If the policyholder successfully completes an entire claim-free policy tenure, the health insurance company rewards him by giving the no claim bonus, which helps him to get a higher cover at a lower rate. 
  2. Types - There are two main types under which the NCB in health insurance policy is available:
    • Cumulative Benefit 
      This variant of NCB offers a rise in your sum insured for every claim free year. If you have the cumulative benefit NCB, your sum insured will go up by a fixed percentage for every claimless year. The premium will remain fixed, so you will effectively get a higher cover by paying the same amount of money. This is the most common form of No Claim Bonus that most SAHI(Stand Alone Health Insurance) companies and general insurance companies provide.
    • Premium Discount 
      In this type, the insurance provider offers a discount on the premium of the following policy year if no claim was made in the previous policy year. The discount keeps getting piled on year by year and in a few years, you can even get a discount of 50% on your overall health insurance premium. If however, you make a claim on your health insurance policy in any year, all the accumulated NCB will be lost.
      However, this is not quite prevalent now, as it was some years ago. 
    • Wellness Benefits and Vouchers
      Some insurance companies provide wellness benefits and vouchers for shopping, annual health check-up, etc. as a part of their no claim bonus benefits. So, over and above the increase in coverage, you would also get additional benefits for not raising a claim in the entire policy year.
  3. Avoid Small Claims: Save the NCB - One of the main benefits of the NCB is that it helps you to understand when to make a claim and when to pay the medical bills yourself. 
    For example, if you have a simple arm fracture and the medical bill comes to a couple of thousand rupees, you can easily afford it. If you make a claim for it, you end up losing the NCB. So, you need to weigh the pros and cons of claiming. If your NCB discount or your increase in coverage is more than the claim amount, then it is better not to claim the same.
    Then, the NCB can be transferred from one insurance provider to the other if you wish to port your health insurance policy. These advantages indeed make the no claim bonus a very beneficial feature of health insurance.

Now that you know more about the NCB in health insurance, make sure your insurance provider applies the NCB to your coverage at the end of every claim free year. 

Understanding Restoration Benefit in Health Insurance

The next important component for you to understand is the restoration benefit. This is a very handy and crucial benefit that you should look out for. The features of health insurance restoration benefit include:

  1. Rationale  - The rationale behind the restoration benefit in health insurance is that you should have a refill option when your sum insured expires. With the help of the restoration benefit, you can have maximum coverage at all times. This benefit allows you to opt for a refill of the sum insured when you use up the basic cover in a claim. It is not uncommon to have several medical emergencies and claims, especially when many members of a family are covered under a single policy. The restoration benefit option makes it very easy to provide health coverage to everyone whenever there is a need for it.
  2. Types - The restoration benefit in health insurance is available in two forms which are:
    • Complete Exhaustion 
      Under this type of restoration benefit, the sum insured will only be restored if the original sum insured is completely exhausted. 
      For example, if you have a total cover of INR 3 lakhs and you make a claim of INR 1 lakh, your sum insured will not be refilled till the time another INR 2 lakhs are spent. 
    • Partial Exhaustion 
      Under this type, you will get the refill as soon as there is a claim made, irrespective of the amount used. If you have a sum insured of INR 3 lakhs and used INR 50,000 in a claim, the amount will be restored to INR 3 lakhs again.
  3. Benefits 
    The main benefit is that you get maximum protection at all times, no matter how many claims need to be made in a year. However, there are a few clauses you should be aware of. The restored amount will only be available on subsequent claims. If one single claim is higher than the total sum insured, you will have to pay the difference from your own pocket. The insurer will not restore the sum insured unless it has been exhausted during a claim. Another benefit is that you get a high cover overall (owing to multiple claims being made) by paying a small and fixed premium in the year and this proves to be highly economical for you and your entire family.

It is not a difficult concept to understand at all. Just ensure you get the benefit as exhausting your health cover before a claim can be most undesirable. Many of the modern-day cashless health insurance plans offer automatic restoration of the sum insured as an in-built feature. Some plans require you to get it as a rider along with the base health insurance plan. Whether you have it in-built in your plan or need it as a rider, make sure you have it, as restoration of the sum insured is a very important feature of health insurance. 

Different concepts

As you can clearly see from the points mentioned above, the no claim bonus and the restoration benefit are two completely different concepts in health insurance. Make sure you understand what each is and what advantages they offer. In your hurry to buy health insurance, do not get confused between these simple yet handy benefits. When you look to renew your health insurance cover, make sure you pay attention and see the NCB has been applied and the restoration benefit has been provided. Both, the NCB and restoration can fetch you higher value from the overall health insurance coverage.

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