Porting your policy? Understand the catch in no-claim bonus

With your health insurance renewal around the corner, you may receive calls offering lower premiums or better features if you port your policy. This can make you reconsider renewing with your current insurer, especially if you’ve had a bad experience or are facing a steep premium hike. 

Porting does offer continuity benefits, such as credit for the waiting period already served. However, your no-claim bonus (NCB) may not carry over as smoothly, and that’s where many policyholders get caught off guard.

To be clear, when you port your health insurance policy, the waiting period for pre-existing diseases (PEDs) or specific treatments already served under your old policy carries forward. 

For instance, if your PED waiting period is three years and you’ve completed two years with your current insurer, you’ll only need to serve one more year with the new one. The five-year moratorium period—after which insurers can’t reject claims due to non-disclosure or misrepresentation of PEDs—also carries over.

But things get trickier when it comes to the no-claim bonus (NCB). This bonus, which increases your coverage as a reward for claim-free years, is treated differently. While you do get continuity benefits, they’re capped. 

The credit for the waiting period applies only up to the total sum insured, including NCB, from the previous policy. For example, suppose your old policy had a base sum insured (SI) of ₹7 lakh and an NCB of ₹3 lakh, making the total ₹10 lakh. If you port to a new policy with a ₹15 lakh base SI, then continuity benefits (i.e., waiting period credit) apply only up to ₹10 lakh. The additional ₹5 lakh will be subject to a fresh waiting period under the new insurer’s rules.

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Let’s understand it better with two scenarios:

Scenario one: 

Mr. A’s previous policy had a base sum insured of ₹10 lakh. He had collected NCB of ₹10 lakh, making it a ₹20 lakh coverage. Mr. A decides to port his policy. He had heard that no-claim bonus gets carried forward while porting. 

He opted for ₹10 lakh sum insured in the new policy too thinking the additional ₹10 lakh no-claim bonus will be available. To his surprise, his coverage was limited to only ₹10 lakh in the first policy year. On enquiry, he was told the NCB in the new policy will get added only after renewal, but it will have fresh waiting period. 

He felt cheated, but this is how NCB works in portability. It does not get carried forward unless you increase the base sum insured in the new policy up to the base sum insured plus no-claim bonus of the old policy. 

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Scenario two:

Let’s revisit the earlier scenario: Mr. A had a sum insured plus no-claim bonus of ₹10 lakh each in his previous policy, totalling ₹20 lakh. He opts for a ₹20 lakh base sum insured in the new policy. Even as the base sum insured has increased, as long as the increased amount is up to the no-claim bonus, the continuity benefits of the waiting period will apply to that level. 

This is what the no-claim bonus carry-forward in portability means. However, if Mr. A had chosen a ₹25 lakh base sum insured, continuity benefits would have applied only up to ₹20 lakh (base + no-claim bonus from the old policy). The remaining ₹5 lakh would attract a fresh waiting period. Similarly, any new no-claim bonus earned in the new policy will also be subject to the fresh waiting period rules.

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Mint take

Choosing the right base sum insured while porting a policy is crucial. If you’ve accumulated a no-claim bonus in your previous policy, aim to select a base sum insured in the new policy equal to your earlier base sum insured plus no-claim bonus. Otherwise, you risk losing out on the full benefit of continuity—reducing the value of porting in the first place.