Medical costs are increasing rapidly and in some cases, even more than inflation rise! Moreover, with an increase in lifestyle related diseases due to poor diet and lack of exercise, the incidence of hospitalization is also on the rise. In such a scenario, it is critical to have sufficient health insurance cover to meet these rising medical expenses. A cover of Rs. 3 lakhs which was earlier construed to be sufficient now looks very less for a family of four. Increasing your health insurance cover may sometimes prove to be expensive and not everyone can afford it. It is here that top up health insurance covers come useful.
What is a top up cover? It is an additional health cover, over and above your original health insurance. So the coverage you get in a top up health cover is in addition to your health cover. For example, suppose you have a health insurance cover of Rs. 3 lakhs with XYZ Insurance Company. You can take a top up health cover from the same insurance company or another one. Say you take a top up cover of Rs. 4 lakhs, with a deductible of Rs. 3 lakhs. In case of hospitalization and expenses of say, Rs. 5 lakhs, the first Rs. 3 lakhs of expenses will be met by XYZ Insurance Company from your original health policy. The remaining Rs. 2 lakhs will be met by your top up cover.
Deductible: Before we proceed, let us discuss what is meant by the term ‘deductible’. Top up covers come with a certain cut off amount known as ‘deductible’. This means the top up policy will not cover your expenses upto this limit. In the above example, if the deductible in the top up cover was Rs. 3 lakhs, then expenses upto this amount will have to either be met by your primary health insurance cover or from your own sources. Only above this will be met by the top up cover. A lower deductible in the top up cover is better for you. However, lower the deductible, higher will be the premium. Therefore, one has to choose his top up plan carefully, balancing between the right deductible amount and the right top up cover.
Working: In the above example, suppose your hospitalization expenses are less than Rs. 3 lakhs, your primary policy with XYZ Insurance Company will meet the expenses. Suppose the expenses amount to Rs. 8 lakhs, then Rs. 3 lakhs will be met from the primary policy, Rs. 4 lakhs from the top up cover and the remaining Rs. 1 lakh will have to be met from your savings.
Benefits: A top up cover is cheaper than taking a full-fledged health cover for the same amount. This is because of the ‘deductible’ clause in the policy. A top up cover can be very beneficial if there is a chance of high hospitalization expenses and when you do not want to spend a lot on the premium. In the above example, if you did not have a top up cover and if your expenses were Rs. 5 lakhs, then only the first Rs. 3 lakhs will be met by your primary policy. The remaining Rs. 2 lakhs would have had to come from your savings.
Drawbacks: Although a top up cover is useful, one has to be cognizant of the ‘deductible’ clause embedded in it. So you should be prepared that you will not receive the initial amount up to the deductible limit. Another drawback is that these plans usually do not work if there are multiple hospitalizations by the same member or different members of your family. One can opt for super top up plans to overcome this drawback.
How to make the best use of a top up plan? The best way to make use of a top up plan is to choose the ‘deductible’ option wisely. Usually, it is best to opt for a deductible amount which is equal to the sum assured cover you get from your primary health policy (be it with your employer or otherwise). This way, your expenses upto the deductible amount will be met by your original policy. You will also not be paying a high premium by opting for a very low deductible. Opting for higher deductible amount or taking a top up cover when you already have a high primary health cover may not make much financial sense.
A top up cover is an economical way of boosting your health cover and is good when you think your existing cover may not be sufficient to meet the medical needs of your family.
Some Top Up Plans: Not all health insurance companies offer top up covers. The following are some popular top up plans.
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