How Does a Top Up Health Insurance Work in India?
The sum assured in a health insurance policy is usually determined based on your budget for premium payments. If you have a lower budget, you have to compromise with the sum assured, and your risk is not adequately covered. The top-up health insurance plans resolve this limitation of health insurance. In simple terms, top-up health insurance is an additional cover over your existing health insurance coverage. Before going into the details of how top-up health insurance operates in India, let’s understand the meaning of ‘deductible amount’.
Deductible amount: It is the threshold limit above which the top-up health insurance will get activated. As a general practice, the deductible amount is set equal to the sum assured of the primary health insurance policy. Therefore, a claim up to the deductible amount will be covered in your primary health insurance policy, and a claim above the deductible amount will get covered under the top-up plan.
Types of top-up health insurance policies:
Primarily, there are two variants of top-up health insurance policies viz.
Regular Top-up Plan & Super Top-up Plan –
Regular top-up plan:
Regular top-up health insurance plans provide additional coverage over and above the sum assured in the base policy. However, the condition is that the top-up plan will be activated only if the claim amount exceeds the deductible amount for each claim lodged. It doesn’t consider the cumulative effect. Below, we have provided an extensive example to break down this concept for you.
Super top-up plan:
Super top-up health insurance plans provide coverage over the sum assured in the base policy on an aggregate basis. This means, unlike regular top-up health insurance plans, the super top-up plan gets triggered when the cumulative amount of all the claims lodged during the year exceeds the deductible amount. It is especially beneficial in cases where multiple hospitalisations take place.
Let’s see an example to see how the above two top-up plans operate:
1 Claims made during the year Mr A
Base health insurance: Rs. 4 Lakhs
Regular top-up plan: Rs. 6 Lakhs with a deductible amount of Rs. 4 Lakhs (assuming deductible equal to the base health insurance).
Base health insurance: Rs. 4 Lakhs
Super top-up plan: Rs. 6 Lakhs with a deductible amount of Rs. 4 Lakhs (assuming deductible equal to the base health insurance).
2 Claim I-Rs. 4 Lakhs It will be settled by the base health insurance policy. Regular top-up plans will not be triggered. It will be settled by the base health insurance policy. Super top-up plan will not be triggered.
4 Claim II-Rs 5 Lakhs Here, the claim amount does not exceed the deductible amount of Rs. 4 Lakhs. Therefore, Mr A will not get any relief under the regular top-up plan, and he will have to bear the entire amount himself. Super top-up plan will cover the entire claim of Rs. 1 Lakh as the deductible amount (equal to the base sum assured) was already exceeded in Claim-I.
3 Claim II-Rs. 1 Lakhs
As the base sum assured was already exhausted during the settlement of Claim-I, no further claim can be made against it. A regular top-up plan provides claims over and above the deductible amount on a per claim basis. Therefore, only Rs. 1 Lakh (i.e., amount above deductible amount of Rs. 4 Lakhs) will be provided under the regular top-up plan. The rest – Rs. 4 Lakhs shall be borne by Mr A. As the base policy has already expired, this claim will go against the super top-up plan. The super top-up plans consider the aggregate of claims lodged during the year. Therefore, as the deductible amount (which is usually equal to the base sum assured) was already exhausted by the claim amount in Claim-I, Mr B will get the whole claim of Rs. 5 Lakhs from the super top-up plan.
Top-up health insurance gives you the following benefits:
Benefits of top-up plans
As you see in the above examples, in the case of Mr A, the deductible amount was considered for each claim separately. Where the claim amount did not exceed the deductible amount, the regular top-up plan was not triggered. Whereas in the case of Mr B, once the deductible amount was exceeded, the super top-up policy was triggered, and all the subsequent claims were covered under the super top-up plan.
Usually, health insurance providers restrict the sum assured to certain limits depending upon each case, even though you might be seeking a greater sum assured. However, the top-up plans can fill the gap between what the health insurance company provides and what the policyholder (you) seek.
Suppose you already have a base life insurance of Rs. 5 Lakhs, but you want to increase it to Rs. 8 Lakhs. If you increase your base sum assured to Rs. 8 Lakhs, you will have to shell out more premium as compared to a base policy of Rs. 5 Lakhs and a top-up plan of Rs. 3 Lakhs. This is because the insurance company providing a top-up plan has lower risk as the claims are primarily lodged against the base health insurance policy. This is especially beneficial if you have a fixed budget for health insurance.
Pre-policy medical checkups relaxation
Certain companies provide relaxations for pre-policy medical checkups in cases of top-up plans. For example, if the regular health insurance policy provides for a pre-policy checkup for persons above the age of 45, for top-up plans, the age limit may be above 55 years. Relaxations may be provided by other means as well.
Don’t confuse top-up plans with add-ons, riders, cash hospitalisation, etc. All these are entirely different concepts. Top-up health insurance plans can prove to be the most important part of your insurance portfolio. If you feel that your base sum assured does not cover your health risks adequately, then you should go for a regular top-up or super top-up policy as per your needs.