What is a cumulative bonus and how does it work?

If you have purchased a health insurance policy and want your sum assured to increase year after year, you can look for an insurance policy that offers a cumulative bonus built into it.

However, it is important to note that the Cumulative Bonus is different from the No Claim Bonus feature which is usually offered to the insured when he/she does not make any claims during the policy year.

So, let’s first understand what exactly it is.

What is a cumulative bonus?

Cumulative bonus refers to the monetary benefit that is added to the sum assured at the beginning of each policy year.

Because the bonus is cumulative — it increases for each year regardless of whether a claim is made or not. This cumulative bonus is available for individual as well as family policies. Generally, insurers offer an increase of 5 to 50 percent of the original sum assured for each year.

The insurance policy may set a maximum threshold for the cumulative bonus amount.

Let’s understand it with an example. Suppose Ravi Kalra has an insurance policy of 10 lakh and he gets this insurance during the first year. If the policy has the right to increase the insured sum by 20 percent, the policy sum increases to 12 million next year.

And next year — the insured amount will increase by one more 2 lakh, thereby increasing the total sum assured to 14 lakhs.

“Insurance companies today offer new-age products with cumulative bonus features where policyholders can easily increase their sum assured despite filing claims during the policy year. There is often a dilemma among policyholders in choosing the right sum insured, especially in times of rising medical inflation and health uncertainties. Here, the cumulative bonus feature proves to be an added benefit in your health insurance policy,” said Siddharth Singhal, Business Director – Health Insurance,

On the other hand, the no-claims bonus is given only as an incentive for not making any insurance claims during the policy year.

Apart from increasing the sum insured, there is another way in which the insurer can stimulate the policyholder not to claim – a discount on the insurance premium without changing the sum insured.

The basic idea behind offering a premium discount as well as increasing the sum assured is to encourage fewer claims.


Here we describe common exclusions for health, life, motor and general insurance policies.

First published: January 18, 2023, 10:04 am IST

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