Authored by Pankaj Arora

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Health insurance is your safety net when it comes to unforeseen illnesses and medical expenses. The importance of health insurance is usually not realized until the need arises but it is one of the most significant investments you can make for long-term peace of mind. While a regular policy reimburses bills up to sum assured, a top-up plan covers cost after a certain threshold is reached. For price-sensitive markets like India, this has tremendous application and translates to cost benefits for the end customers.

These top-up plans are an extension to your existing health insurance policy and can be taken over by an existing health plan. They help you get coverage over and above your existing health insurance plan and at a much lower premium.

What Is Top-Up Health Insurance Plan?

A top-up plan also called a “High Deductible” health insurance plan offers coverage for hospitalization claims over and above the deductible selected.

Top-up health plans are indemnity policies and they provide the same benefits as regular health insurance policies but the only difference is the high deductibles that make these plans cheaper.

Let’s understand deductibles: A deductible is a fixed amount paid out-of-pocket by an insured for the hospitalization expenses before an insurance company pays the balance cost. For e.g. a customer has a top-up plan of cover for Rs 500,000/- with a deductible of Rs 100,000/-, the insurance company will start paying after the claim amount has exceeded Rs. 100,000/-

There are two types of top-up plans-- top-up and super top-up.

Let’s understand each of them:

Top-up plan

The top-up plan works on a per claim deductible basis and the insured is eligible for claims only if the claim amount exceeds the selected deductible.

Super Top-Up Plan

Super top-up plan works on an aggregate of claims basis and will trigger once the total claim amount including multiple claims in a year exceeds the selected deductible.

Below is an example as to how both the plans work:

Top-Up health plans are meant to bridge the gap between existing policies and actual costs. The idea is to buy extra cover but at a reasonable cost. Hence, it is imperative to consider buying a top-up plan irrespective of the circumstances. The prospect of hospitalization due to COVID-19 and high medical costs in private hospitals was one of the major reasons for individuals to sign up for private health insurance.

However, one should not wait for any emergency to strike but always be prepared. Similarly, if one has a limited health insurance cover from the employer, it will exhaust quickly given the situation. In that context, the super top-up plan will aid individuals to have continued cover for health during the year. Planning and preparation are key.

Things to keep in mind while buying the top-up plan:

Coverage similarity of the base plan and top-up plan- both the plans should be as similar as possible to be able to get the optimum benefit of both the covers.

One should try to buy both the covers at the same time, which enables an individual to have similar benefits in both the covers on account of waiting periods.

One should also try to take a reasonable large cover on the top-up front as the incremental cost is relatively lower and taking a higher Sum Insured at the beginning does not put an individual on restrictions due to an increase in sum insured later.

The benefit of top-up covers:

The top-up cover is beneficial to the insured as an additional cover with a deductible available at a much cheaper price than the base cover for a higher sum insured.

Considering that the chances of exceeding the deductible threshold are low (in case of high deductibles), the premium for such covers are comparatively lower than the base health insurance plan for high sum insured.

These are also suitable for the self-employed/business class level where an individual can self-fund the hospitalization expenses up to a certain limit and utilize the super top-up plan for unfortunate events where the hospitalization expenses are high.

These covers are also suitable for service class people who are covered for a limited amount through employer-provided health insurance cover. The cover limit can be extended by suitably selecting the deductible.

With the help of top-up covers, one can get sufficiently large health insurance cover at a reasonable price and it covers any eventuality in case one has to undergo a serious illness treatment process.

Top-up and Super top-up plans are an excellent way to increase your health insurance coverage amount. Investing in such plans is a wise decision as it will help one in securing oneself in case of any emergency.

Pankaj Arora is MD and CEO at Raheja QBE General Insurance