What is cumulative bonus and how does it work?

If you acquire a medical insurance policy, and need your sum insured to extend yr after yr, you may search for an insurance coverage coverage that provides cumulative bonus embedded in it.

It is, nonetheless, vital to notice that cumulative bonus is totally different from  no-claims bonus function that is often provided to the insured individual when s/he does not make any claims in the course of the coverage yr. 

So, allow us to first perceive what precisely is this.

What is cumulative bonus?

The cumulative bonus refers to a financial profit which is added to the insured sum in the beginning of every coverage yr.

Since the bonus is cumulative — it will increase for every year whatever the reality the declare is made or not. This cumulative bonus is obtainable for particular person in addition to family floater policies. Generally, insurers provide a rise of 5 to 50 % of the unique sum assured for every year.

The insurance coverage coverage might specify a most threshold on the cumulative bonus quantity.

Let us perceive this with an instance. Suppose Ravi Kalra has an insurance coverage coverage of 10 lakh and he will get this insurance coverage cowl in the course of the first yr. If the coverage is entitled to twenty % improve within the sum assured, the coverage sum grows to 12 lakh the next yr.

The subsequent yr as properly — the insured quantity will rise by one other 2 lakh, thus rising the general sum insured to 14 lakh.

“Insurance firms at present provide new-age merchandise with cumulative bonus options whereby policyholders can simply improve their sum insured regardless of making claims in the course of the coverage yr. There is usually a dilemma amongst policyholders in selecting the best sum insured particularly in the course of the rising medical inflation and well being uncertainties. Here, a cumulative bonus function proves to be an added benefit in your medical insurance coverage,” stated Siddarth Singhal, Business Head – Health Insurance,

On the opposite hand, non-claims bonus is given solely as an incentive for not making an insurance coverage declare in the course of the coverage yr.

Apart from rising the sum assured, there is one other manner during which insurer can incentivise the policyholder for not making a declare – a reduction in insurance coverage premium with out altering the sum assured.

The underlying thought behind providing a reduction in premium in addition to rising the sum assured is to incentivise the decrease variety of claims.


Here we describe the widespread exclusions for well being, life, motor and basic insurance coverage insurance policies.

First Published: 18 Jan 2023, 10:04 AM IST