How Top-up Health Insurance plans give you more Coverage at a Lesser Premium?

Health Insurance

Medical costs have become unaffordable, to say the least. Medical inflation is rising steadily and quickly in India over the last few years. According to reports, the average retail healthcare inflation in the financial year 2017-18 was 4.39%. This increased to 7.14% in 2018-19 (Source: India Today). A considerable rise, don’t you think?

Against the increasing healthcare costs, you need an optimal coverage under your health insurance plan. A low sum insured means out-of-pocket expenses if a severe emergency strikes. Moreover, under family floater plans, an optimal coverage, i.e. at least INR 10 lakhs and above, is needed for sufficient coverage against expensive medical treatments. Can you afford a high sum insured in your health plan?

Though recommended, a high sum insured involves a considerable amount of premium. Paying such premiums every year might prove to be challenging and so, the relevance of a top-up health insurance plan comes into the picture.

What is top-up health insurance?

A top-up health insurance plan is an indemnity oriented health insurance policy. It comes with a deductible and a sum insured. If the claim exceeds the deductible limit, the excess claim is paid by the top-up health plan.

For example, say you buy a top-up health plan with a sum insured of INR 10 lakhs and a deductible limit of INR 3 lakhs. Claims up to INR 3 lakhs would not be paid by the plan. However, if you incur a claim of INR 4 lakhs, the top-up policy would pay INR 1 lakh as claim.

Benefits of top-up plans

Top-up plans are the best way to increase your health insurance coverage. Here are the reasons why:

  1. They have low premiums allowing you to increase your health insurance coverage without hurting your pockets. Top-up plans are, in fact, the most cost-effective way of enhancing your health insurance coverage 
  2. They provide a wide scope of coverage right from pre-hospitalisation expenses to post-hospitalisation costs, ambulance charges, day care treatments etc.
  3. You can buy top-up plans on family floater basis too to cover all your family members
  4. The premium paid for the policy qualifies for a deduction under Section 80D of the Income Tax Act, 1961 up to INR 25, 000. For senior citizens, the limit increases to INR 50, 000. You can claim an additional deduction of up to INR 50, 000 if you buy a plan for your parents too.

Types of top-up plans

Top-up plans come in two variants – top-up and super top-up plans. Both the plans are similar to one another except one fundamental difference. In top-up plans, each instance of claim is measured against the deductible limit. If any claim exceeds the deductible, the top-up plan is triggered. 

In a super top-up plan, however, aggregate claims made in one policy year are considered. If the aggregate of all claims exceed the deductible, the excess claim is paid.

Here’s a quick example to make things clear –

Suppose, you buy a top-up and a super top-up plans each with a sum insured of INR 10 lakhs and a deductible of INR 3 lakhs. You incur three claims in a year – INR 2 lakhs, INR 3 lakhs and INR 4 lakhs. Here’s how the top-up and super top-up plans would work –

Claim details 

Top-up plan

Sum insured – INR 10 lakhs

Deductible – INR 3 lakhs

Super top-up plan

Sum insured – INR 10 lakhs

Deductible – INR 3 lakhs

Claim 1 –INR 2 lakhs

Since claim is below the deductible limit no claim would be paid

Since claim is below the deductible limit no claim would be paid

Claim 2 – INR 3 lakhs

Since claim is equal to the deductible limit no claim would be paid

Aggregate value of claims = INR 2 lakhs + INR 3 lakhs = INR 5 lakhs

Since the aggregate value exceeds the deductible, claim of INR 2 lakhs would be paid 

Claim 3 – INR 4 lakhs

Claim of INR 1 lakh would be paid since it exceeds the deductible of INR 3 lakhs

Since the aggregate claims have already exceeded the deductible limit, the full claim of INR 4 lakhs would be paid

Super top-up plans are better than top-up plans as they consider the aggregate claim amount. As such, the probability of claim settlements is higher in super top-up plans.

Choosing the right super top-up plan

When buying a super top-up plan for enhancing your health insurance coverage, here are some tips to buy the right plan –

  1. Match the deductible of the super top-up plan to the existing coverage under your health plan. This way, claims up to the deductible would be paid by your existing policy and if you have excess claims, they would be settled by the super top-up plan.
  2. Check the coverage benefits offered by super top-up plans and choose a plan that offers a comprehensive scope of coverage
  3. Look for sub-limits under the coverage benefits offered by super top-up plans, especially the room rent limit. Try and opt for plans which do not impose sub-limits for better coverage
  4. Opt for family floater super top-up plans to provide coverage to every family member
  5. There are dozens of super top-up plans available in the market. Compare the plans of different insurers to find one that offers the best coverage at the lowest premium

Review your health insurance coverage today. Ensure that the coverage is optimal. If not, you can opt for super top-up health plans and enhance your coverage without having to part with considerable premiums.

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