Getting To The Bottom Of Top-Up Plans

Top-up health plans provide policyholders a good option to benefit from medical cover over and above your regular reimbursement plan, subject to a certain limit, says Jay Sampat.

KEY POINTS

• You can choose a top-up plan when you want to increase your health cover without paying too much.
• The top-up cover kicks in only after the amount corresponding to the basic policy has been crossed, and pays for the claim amount over and above the base policy.
• Though it is not compulsory to have a health reimbursement policy to buy a top-up plan, it is futile to take a top-up policy unless you have reimbursement cover equal to at least the threshold limit of the top-up plan.

You can well imagine the risks involved in driving without a spare tyre. Till 1904, car drivers dreaded punctured tyres. Then, a simple idea by an Englishman revolutionised things – he added a spare so that if the tyre got punctured, you had a ready-to-use stand-by. Top-up health plans play a similar role. They act as a ‘stepney’ to your health reimbursement policy after you exhaust the base plan.

In simple words, when you are hospitalised, the insurer will pay up to the set sum insured limit on your base policy. The top-up, on the other hand, will kick in only after the amount corresponding to your basic policy has been crossed. The top-up policy will pay for the claim amount over and above the base policy.

Say, you have a cover of Rs 5 lakh. However, looking at the soaring healthcare costs, you know that this may not suffice in an emergency situation and may wish to enhance it by another Rs 5 lakh. You can buy a separate health policy (which will cost around Rs 6000-7000 a year) or request your insurer to upgrade the plan by Rs 5 lakh. Both are expensive options. A top-up plan for Rs 5 lakh, on the other hand, will cost you just Rs 2000 a year.

A top-up plan makes sense when you want to increase your health cover without paying too much. However, it will probably have a huge threshold limit, which is sometimes as high as the sum insured itself. Though it is not compulsory to have a health reimbursement policy to buy a top-up plan, it is futile to take a top-up policy unless you have reimbursement cover equal to at least the threshold limit of the top-up plan. In this way, you will be able to take care of your bills even before the top-up plan kicks in.

For top-up policies, most insurers do not ask for medical check-ups up to the age of 55 years. In reimbursement plans, this is usually 45 years. Riders in regular policies cover a few serious illnesses, whereas top-up policies cover all treatment costs due to hospitalisation.

Moreover, while riders or add-on covers belong to particular policies and can be taken only with them, top-up plans are independent covers that can be bought separately from the existing policy. This means that you can buy a regular hospitalisation reimbursement plan and top-up cover from different insurers. Both your indemnity policy and the top-up plan can be claimed together for a single hospitalisation. The only condition to be met is the threshold of the top-up plan. Moreover, there is no contribution clause. So, if a policyholder has two health policies (one indemnity and one top-up plan) from two different insurers, each insurer is liable to pay its part of the claim.

One of the disadvantages of a top-up plan is that it generally covers only single incidence hospitalisation. That is, if your hospital bill exceeds the deductible during a single hospitalisation, only then can the top-up plan be used. For instance, if a person has a top-up cover with a threshold of Rs 3 lakh and gets hospitalised twice in a year, incurring bills of Rs 2.5 lakh and Rs 2 lakh respectively, the top-up plan will not be triggered. The same is the case with a floater plan under which two members are hospitalised with individual bills of Rs 2.5 lakh each.

In addition, there may be a single illness clause as well as specific guidelines on what is considered a single illness. For instance, if a relapse occurs within 45 days of discharge from hospital, it is usually considered single illness. However, if the customer is hospitalised again (even for the same illness) after 45 days from discharge, it is usually held as a fresh illness. The deductible has to be crossed for every single illness for policy benefits to commence.

With increasing medical costs, a basic cover of Rs 2-3 lakh sum insured is not enough for a major medical requirement today. It is for this reason that top-up plans have gained acceptance. While choosing such a plan, one must remember that the higher the deductible, the cheaper will be the plan. However, since top-up health plans are meant to bridge the gap between existing policies and actual costs, the idea is not to duplicate but to buy extra cover at a reasonable cost. So, exclusions such as day care and dental treatment will not make a big difference, as they will be taken care of by a base health policy.

On the other hand, do not forget to check the deductible criteria for single illness, the waiting period for pre-existing diseases, pre- and post-hospitalisation expenses, etc. Also, check for who can be included in the cover. Many policies will disappoint you if you wish to include parents in the cover as well.