How a top-up health plan can help you?

As Ashok poured through his wife Lata’s discharge summary and hospitalization bills, he rued the fact that he had not listened to his friend’s advice, given a few years back. His friend had advised him to supplement his employer given health insurance plan with a top-up health plan. He had then shrugged off the suggestion. 

The hospitalization expenses for his wife’s stroke related treatment exceeded his employer's health plan by Rs 4 lakhs. This amount was paid from his savings leaving him in a tight spot financially. You may be wondering how a top-up plan could have helped him in this situation. Let’s see how.

A top-up health insurance plan is a reimbursement plan which has a deductible or comes into effect after a certain threshold limit only. One has to choose the deductible amount while buying the plan. The expenses till the deductible limit are to be met either from your own pocket or by way of an existing health insurance plan.

For eg: Let us assume you have health insurance cover for Rs 3 lakhs and a top-up plan for Rs 5 lakh with a deductible of Rs 3 lakhs. Here, if the claim is Rs 5 lakhs, then 3 lakhs will be paid by the base health plan and Rs 2 lakh by the top up plan.

If the claim is for Rs 2.5 lakhs, it will be paid by the base health plan and the top up plan will not be invoked as it comes into effect only after a threshold of Rs 3 lakhs.

If the claim is for Rs 10 lakhs, the first Rs 3 lakhs will be paid by the base health insurance plan, the next Rs 5 lakhs by the top up plan and the balance Rs 2 lakh from own pocket as both plan limits are exhausted.

A top-up plan is meant to supplement an existing health insurance cover or Employer’s health insurance plan (though it is not mandatory to have a base health plan to buy a top up). Considering the soaring healthcare costs, a top up plan provides a cushioning effect in case of a major ailment or surgery where the base health insurance plan falls short of meeting the expenses (as in Ashok's case). You may be wondering why not buy another health insurance plan for additional sum assured or enhance the sum assured for your existing health plan instead of buying a top-up plan where a deductible is applicable?

The reason is that since top-ups come into effect only after a threshold limit/deductible, the risk for the insurer is lesser compared to the base health plan. The base health plan will take care of the expenses majority of the times and the top-up will be invoked only exceptionally. As such premium for a top-up plan is lesser than that of a base health plan.

For better clarity, giving below the premium applicable for a base health plan and top up plan of the same insurance company for a 40-year-old Male:

The premium for a base health plan of Rs 3 lakhs is Rs 7,109/- annually.

The premium for a top-up health plan of Rs 5 lakh with a deductible of Rs 3 lakh is Rs 3,203/- annually.

The math clearly shows that it is beneficial to buy a top-up plan rather than another base health plan. Also, in top-up plans most insurers do not ask for medicals up to the age of 55 years whereas it is 45 years for base health insurance plans.

Important points to check before buying a top-up plan

Please check the waiting period applicable for pre-existing ailments and the events in which the top-up will get triggered. Most top-up plans require the deductible limit to be crossed for every single hospitalization. For eg: If the deductible is Rs 3 lakhs and there are 2 hospitalizations that happen in a year with claims of Rs 2 lakhs and 2.5 lakhs respectively then top-up will not be invoked as both individual claims are less than the deductible (though cumulatively they cross the Rs 3 lakh deductible). The same is the case with a floater plan under which two members are hospitalized with individual bills of Rs 2 lakhs and Rs 2.5 lakhs respectively. You should clarify whether the plan mandates per-claim deductible or overall deductible.

Do understand the guidelines on what is considered as a single illness. Most insurers consider a relapse within 45 days of discharge from hospital as a single illness. However, if the insured is hospitalized again for the same illness but after a period of 45 days, then it is considered as a fresh illness and the deductible limit will have to be met afresh for the top-up plan to be triggered.

Hope this article has helped you understand how a top up health plan can help you effectively handle health related crises for you and your family. Also, do check for the points mentioned above before you execute your decision to buy a top-up.