With healthcare costs in India increasing at an exorbitant rate every year, it becomes mandatory to have a health insurance policy. However, most people usually take a health cover of approximately Rs 3-4 lakh for the family. Since this amount covers the entire family, this can fall short of your actual expenditure. Multiple ailments of family members, or even if a single member has to undergo hospitalisation many times can force you to dig into your savings to meet the expenses. This is where top-up health insurance plans can be used.
A top-up health insurance policy is an additional health insurance which provides coverage over an existing health insurance. This means in addition to a basic mediclaim policy, you can purchase a top-up cover, which will give you coverage over and above what is available in your original policy. This usually works out to be cheaper than if you enhance limit of the same policy or purchase a new health insurance policy. The top-up policy works like any other health insurance policy and has the same benefits of reimbursing hospitalisation expenses, any medical expenses, etc.
What’s top up?
The main difference between a top-up cover and a regular health insurance policy is that top-up plans can be used only in case expenses incurred are beyond a certain limit. This limit, known as the deductible is decided beforehand and premiums are calculated accordingly. A top-up plan with a higher deductible has a lower premium attached to it.
Another criterion is that a top-up plan normally works only on a single incidence of hospitalisation. This means that you can use the top-up plan only if your medical bills exceed the deducible during a single hospitalisation by a single member.
How it works
Let us assume you have an existing health insurance policy with your employer which covers you and your family to the extent of Rs 3 lakh. If your wife is hospitalised during the year and expenses amount to Rs 4 lakhs, then you must bring in Rs 1 lakh from your savings, if you do not have a top-up cover.
Now, let us assume you have taken a top-up insurance for Rs 5 lakhs with a deductible of Rs 3 lakh. Then, in the above case, the extra Rs 1 lakh, which is over and above the limit of Rs 3 lakhs from your existing health insurance policy will be paid by the top-up insurance policy. If you incur expenses of Rs 8.5 lakh, then the maximum amount that can be claimed is Rs 8 lakh (Rs 3 lakh from the existing health insurance policy and Rs 5 lakh from the top-up policy). The extra amount of Rs 50,000 needs to be paid by you from your savings.
Now, assume another scenario. You have an existing health insurance policy of Rs 3 lakhs and top-up insurance policy of Rs 5 lakh with a deductible of Rs 3 lakh. Your wife gets hospitalised twice in a year with bills of Rs 2.5 lakh and and Rs 2 lakh each. Then the top-up will not be triggered in both cases. Further, if both your wife and son are hospitalised with expenses of Rs 2.5 lakh each during the year, even then the top-up will not be triggered.
When do top-up plans make sense?
Top-up plans are useful if you want to increase your health cover without paying too much. In the above example, if you think Rs 3 lakh is too low to cover the fast-increasing healthcare costs, then top-up plans are a cheaper option than buying a new policy or enhancing limit of the existing policy. Further, if you already have a health insurance policy, then do not buy a top-up plan which has a deductible of more than the coverage from the existing plan. For example, if you have a health insurance policy with a cover of Rs 3 lakh, then do not buy a top-up plan with a deductible greater than Rs 3 lakh.
Author is CEO, BankBazaar.com
