Understanding Health Insurance Add ons :- Do not Fall For it

10. Top-Up Plans

If you’re looking for more coverage than what your current health insurance policy provides, you have two choices. To add a few lakhs to your sum insured, you can pay an extra premium or get the same coverage at a lower price with a top-up policy.

One top-up policy with a cover of Rs 50 lakhs can be found at relatively low prices, going as little as Rs 1000 per year.

We have gone over the advantages and drawbacks of top-ups, but gaining a more thorough comprehension requires further exploration.

A top-up plan provides additional coverage beyond the deductible when you’re hospitalised. The minimum out-of-pocket expenses, known as the deductible, must be met by the customer. So if your hospital bill comes to Rs 12 lakhs and your deductible is Rs 5 lakhs, then you need to pay that sum, and the rest will be taken care of by the top-up policy.

You don’t have to pay the deductible from your own pocket; you could use another applicable insurance plan instead. After that, your top-up policy should cover whatever is left in a valid claim.

Let’s consider one more instance of driving back.

If your employer provides you with a health insurance plan to the value of Rs 5 Lakhs, then it’s a fair amount. However, you may want to augment this and purchase extra cover, so a top-up policy could be the ideal solution. The insurer who provides this is likely to ask two questions: 

1. Do you require a specific type of coverage?

2. What deductible do you prefer to choose?

Top-up policies can come with hefty cover options ranging from Rs 20 lakhs up to a crore, offering you plenty of choices. However, when it comes to deductibles, the options may be more restricted, with most insurers just giving you a choice between Rs 5 lakhs or Rs 10 lakhs; there’s less room for negotiation.

A top-up plan with a deductible of Rs 10 lakhs is more cost-effective than a policy with a deductible of Rs 5 lakhs, under the same conditions. This is because probability suggests that you are more likely to exceed the Rs 5 lakhs limit during hospitalisation than the Rs 10 lakhs one. 

Once you have crossed this threshold, your insurer will have to bear the additional costs. Hence, having a higher deductible allowance provides greater coverage and assures your insurer of lesser financial obligations.

For this instance, a deductible of Rs 5 lakhs appears more practical, seeing that your employer already takes care of it. If you ever find yourself hospitalised, the company-provided cover should take care of the first Rs 5 lakhs while the top-up policy will look after the rest.

It appears to be a great deal, yet one may not be fascinated with it.

What is the issue?

When it comes to top-up plans, one should be aware that payment of the claim is only made after supplying the deductible. If an individual opts for such an inexpensive deal, they run the risk of things not going as they’d hoped. 

Take, for example, a bill totalling Rs 7 lakhs following a hospital stay. Assuming one has an employee insurance policy, they can cover the first Rs 5 lakhs but will have to use their top-up plan to cover the remaining Rs 2 lakhs. However, should they require further hospitalisation in the near future, they would have to pay the deductible again if they wish to benefit from their top-up plan.

This has a very limited reach; going to the hospital to find out that your top-up won’t be applicable because you have a medical bill of Rs 3 lakhs is disappointing. In this situation, for someone who has already used up their employee insurance plan, having to pay the deductible all over again can be quite distressing.

No matter the size of your top-up policy, it won’t be beneficial when you really need it. A cover of Rs 50 lakhs will not help in this situation.

Verdict: Highly Gimmicky

11. Super Top-Up Plans

Super top-up plans were developed to resolve the issues associated with top-up plans. The concept was to eliminate the continuous deductible requirement, making it simpler to use. They argued that paying the deductible just once should be sufficient, and hence this deal was created. It may be costlier in comparison with top-up plans but much more practical.

Let us refer back to our preceding example. Suppose your medical bill amounts to Rs 7 lakhs upon being discharged from a hospital, and you have a super top-up plan with a deductible of 

Rs 5 lakhs. You leverage your employee insurance plan and pay the initial Rs 5 lakhs. Through this awesome super top-up, the remaining Rs 2 lakhs can be paid out.

Great.

Imagine having to go back to the hospital, only to be asked for another Rs 3 lakhs after a brief stay. With a normal top-up plan, you’d have to pay any deductible amount again. But with a super top-up plan, you won’t be paying it twice. It doesn’t matter how hefty the bill is either; if you have extensive cover, this plan will take care of it – even if it goes up to Rs 10 lakhs! Super top-ups are incredibly useful in such cases.

Remember to purchase the super top-up policy in sync with when you renew your employee insurance plan. If you don’t, it could lead to issues for you. Here’s an example: 

On the 3rd of January 2021, you purchase a policy with a Rs 5 lakh deductible to increase your security.

On March 3rd 2021, your employee insurance plan is up for renewal. You pay the premium, and a one-year term commences. The policy will remain valid until the same date in 2022.

December 20th 2022: Upon hospitalisation, the employee insurance policy takes care of the bill. After the deductible has been paid out, there is no need to worry about the Rs 5 lakhs.

January 3rd 2022, marks the beginning of a one-year renewal period for the super top-up policy. This contract will remain in effect until January 3rd 2023.

On the 20th of February 2022, you find yourself once more in the hospital with a hefty bill of Rs 3 lakhs to pay.

Unfortunately, you’re unable to take advantage of the super top-up policy just yet as you haven’t paid your deductible in this policy term. Though recently you did pay Rs 5 lakhs when hospitalised, since then, you have renewed your policy and a new term has begun – this dictates that the deductible must be paid again if you want to use the super top-up plan.

These deals may be priced lower than usual. However, it’s important to remember that nothing comes for free. We don’t believe the current pricing is sustainable, and it looks as though a price correction may be on the horizon.

Verdict: Not a gimmick