In today’s world where healthcare costs are increasing rapidly, a normal health cover of Rs. 3-4 lakhs for the entire family, which most people opt for, may not be sufficient. This nominal health cover may fall short of your actual expenditure if there are multiple ailments by more than one family member or even if a single family member is required to undergo hospitalization many times. You may have to disturb your savings in such a situation. A top-up health insurance plan can be used in this case.

Meaning
A top-up policy is an additional insurance, providing coverage above an existing health insurance. In other words, when you purchase a top-up cover, you get coverage over and above what is available in your original policy. You can purchase the regular policy and top-up policy from the same or different companies. A top-up policy has similar benefits and conditions as a normal health insurance policy. A top-up policy usually works out to be cheaper than taking a new policy or enhancing limits of your existing policy. But wait, everything cannot be positive about this. There must be a catch somewhere.

So, what is the catch?
The main criterion is that a top-up plan can be used only if expenses you claim are beyond a certain limit, known as the “deductible”. This limit is decided in advance and premiums are calculated accordingly. So a top-up plan with a higher deductible has a lower premium. Further, a top-up plan usually works only on a single occurrence of hospitalisation. In effect, you can use the top-up plan only if your medical bills exceed the deducible during a single hospitalisation by a single member.

Working
Let’s understand the working of a top-up plan in the following cases:

It is seen from the above examples, that when you buy a top-up policy, you can avoid or reduce the outflow from your pocket if hospitalization expenses are very high. However, it is seen that in Cases 4 and 5, when there is more than hospitalization by the same member of your family or if there are multiple hospitalizations by different members of your family, the top-up does not get triggered, and you will have to bear the shortfall from your savings.

Given the restrictions, are top-up plans good for you?
A top-up plan is an economical and simple option to augment your health-cover. Top-up plans are useful only when you already have an existing policy and expect that to be insufficient. In the example above, if you feel Rs. 2 lakhs is not sufficient to cover your entire family, you can opt for a top-up plan which works out cheaper than a new policy. Additionally, when you already have a health insurance policy, you should not buy a top-up plan which has a deductible higher than the existing plan’s coverage. So if you have a health insurance policy with a cover of Rs. 2 lakhs, then do not buy a top-up plan with a deductible higher than Rs. 2 lakhs. It does not make sense to opt for top-up plans with high deductibles or if you already have an existing policy with a very high cover.

Smitha Hari
Team Getting You Rich