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Cumulative Bonus is a reward offered by an insurance firm to the insurer for filing no claims during a policy year. Basically, it's a gift offered to the policyholder for staying fit and not registering any claims on his/her health plan. With cumulative bonus, the policyholder can enjoy a higher sum assured on his/her health plan without paying extra premium.

Let’s explain cumulative bonus with an example.

Let’s assume Mr. Murthy has bought an insurance plan with a sum insured of 5 lakhs rupees. He hasn’t registered any claim within the first policy year. His insurer offers him a cumulative bonus of 5%.  This increases his sum assured for the next year to Rs. 5,25,000. There is no increase in premium. He continues to pay the same premium as before, while enjoying a higher sum assured.

Similarly, for the second year if he again doesn't register a claim, his cumulative bonus increases by 5% again, so he gets a total 10% increase in the sum assured. His sum assured for the second year increases to Rs. 5,50,000, while his premium remains the same.

Most health insurance companies offer a cumulative bonus for every claim free year, up to a maximum limit. The maximum limit for cumulative bonus varies from policy to policy and ranges anywhere from 50% to 100%.

Key point to keep in mind: If you want to enjoy a cumulative bonus on your health plan, you need to avoid making frequent claims. Make claims only when it's genuinely needed. Making frequent and minor claims breaks your streak of no-claims, thereby making you lose on your cumulative bonus.

Also, your insurer companies may increase your premium depending upon the frequency of registering the claim. If you are not making any claims, it’s a sign that you simply are leading a healthy lifestyle. When you pay out of pocket for small ailments, you continue keeping your cumulative bonus intact, thereby enjoying a higher sum assured, when it is needed the most.

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