Top-Up Health Plans: A Booster Shot
4/5/2012 9:00 PM Thursday
Is the health cover you have purchased enough to take care of any larger health-related expenses that may befall you? Does your health insurance policy really guarantee you peace of mind? If not, make health insurance work to your advantage by using top-up insurance plans, says Jay Sampat.
- As health costs soar, you need to review your health insurance needs and cover any shortfall.
- A top-up health insurance plan, also known as an add-on plan, is a regular indemnity plan that covers hospitalisation costs after a threshold limit.
- You can buy a top-up plan for your entire family using the family floater option, wherein you can buy cover up to Rs 15 lakh with a deductible of Rs 5 lakh.
- The prime benefactors of top-up plans are senior citizens, who otherwise have to pay a very high sum to buy a fresh policy.
In India, most people have health insurance ranging from Rs 1 lakh to Rs 3 lakh. While this amount is usually enough for minor surgeries, a serious ailment or an accident could set you back by a greater sum. Therefore, as health costs soar, you need to review your health insurance needs and cover any shortfall. One of the options to increase your cover in a cost-efficient manner is to take a top-up health insurance plan.
A top-up health insurance plan, also known as an add-on plan, is a regular indemnity plan that covers hospitalisation costs after a threshold limit. In insurance parlance, this limit is called the ‘deductible’. The deductible is that portion of the claim amount that is not covered by the insurer and must be paid by the insured before the benefits of the insurance policy can kick in.
Top-up plans start with a basic deductible of Rs 1 lakh, which can go up to Rs 5 lakh. A deductible of Rs 1 lakh means that the first Rs 1 lakh of the hospitalisation bill will have to be borne by the insured himself and the balance will be paid by the insurer. For example, say the cover offered to an individual by his/her company is Rs 3 lakh. Suppose this individual meets with an accident and the bill is Rs 5 lakh. If the individual has a health cover of Rs 3 lakh from his/her employer and an additional Rs 5 lakh top-up policy with a deductible of Rs 3 lakh, Rs 3 lakh will be paid from the policy bought by the employer and the remaining Rs 2 lakh will be paid by the top-up policy. The top-up policy will pay for expenses up to Rs 8 lakh, if the sum assured is Rs 5 lakh with a deductible of Rs 3 lakh. If the top-up buyer has no other cover, s/he has to bear Rs 3 lakh of the expenses first. Owing to the deductible, these plans are cheap.
A question that many financial advisors get asked is, “What is the need for a top-up health cover when I am already covered by my employer?” Well, most advisors recommend buying an individual cover because the cover taken by the employer lapses if one changes jobs. Also, the amount of cover offered by the company may prove insufficient in some cases. However, if the extra premium is the main reason for avoiding an individual cover, then one can definitely consider buying a top-up plan to the existing corporate health cover.
Buying a top-up plan makes sense in two scenarios. The first is related to the amount of cover received from your employer. In most companies, the cover you are entitled to is linked to your designation. Hence, if you are at a lower designation, you may need to augment your insured amount with a top-up cover. The other scenario is where you already have a health cover for a small amount, say Rs 1 lakh, but wish to increase the quantum of that cover. However, if you are likely to undertake frequent job changes, it is better to buy a low value cover of Rs 1-2 lakh and then top it up with a sizeable cover.
According to experts, a top-up plan is always better than buying different health plans if one wishes to increase the cover, as multiple policies can prove to be a nightmare at the time of claims settlement. For instance, if the first insurance company does not return the original documents and bills on time, you may be denied the claim settlements from other companies because of the submission clause within a pre-defined period of time. You can also buy a top-up plan for your entire family using the family floater option for cover of up to Rs 15 lakh with a deductible of Rs 5 lakh.
One thing to remember in such cases is that the top-up policy applies the ‘deductible’ criteria to each claim and not to all claims in one year put together. For a three-member family, with the senior most member aged 40, the premium for a top-up policy with sum assured of 10 lakh and a deductible of Rs 3 lakh works out to approximately Rs 4500 per year. Among the prime benefactors of top-up plans are senior citizens, who otherwise have to pay a very high sum to buy a fresh policy.
Top-ups also have a drawback though. When there are many claims in a year and all are below the deductible, the policy may not be useful.
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