What is Top Up Health Insurance?

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Even if you do not drive a car, you would still be able to understand the significance of a spare tyre. If your car gets a puncture, you have a stand-by already in place in the form of the spare.

A top up health insurance plan is akin to a spare tyre. It is essentially an add-on policy that can be added to your pre-existing health insurance. The top up plan provides you with additional insurance coverage when your sum insured limit is exhausted.

In this case, the sum insured limit can also be referred to as the threshold limit or a deductible amount. Top up plans are divided into two types , which include:

Regular Top Up Plan: A regular top up plan can only be employed when the claim amount exceeds the deductible amount of your health insurance policy. For example, if you are hospitalised, and the expenses exceed your health insurance cover, you can claim the difference from the regular top up plan.

Super Top Up Plan: A super top up policy pays the amount once your yearly threshold limit is exhausted due to recurring claims. This plan works at a cumulative level, and it only kicks in when the base policy amount has been used.

How Does It Work?

Let’s first understand how a regular top up health insurance plan works with the help of a scenario. Mr Sharma is hospitalized, and his basic health insurance has a threshold limit of Rs 3 lakhs, and a regular top up plan with a deductible of Rs 3 lakhs . Across the year, he had three claims of Rs 3 lakhs, Rs 1 lakh, and Rs 4 lakhs, respectively. Now, let’s take a look at each of these claims:

Claim 1 – Rs 3 Lakhs: Covered by the basic health insurance policy
Claim 2 – Rs 1 Lakh: In this claim, the entire amount has to be paid by Mr Sharma, as this claim does not exceed the deductible amount.
Claim 3 – Rs 4 Lakhs: In this scenario, the top up plan will cover Rs 1 lakh, while the remaining Rs 3 lakhs will have to be paid by Mr Sharma as he exhausted the entire cover in claim 1.

Now, let’s understand the working behind super top up health insurance using a similar example. Ms Agarwal is hospitalized, and her basic health insurance has a threshold limit worth Rs 3 lakhs and a super top up plan with a deductible of Rs 5 lakhs . Throughout the year, she had three claims of Rs 3 lakhs, Rs 1 lakh, and Rs 4 lakhs, respectively. Take a look at the reasoning behind each of these claims:

Claim 1 – Rs 3 Lakhs: As was the case with the regular top up plan, this is also covered by the basic health insurance policy.
Claim 2 – Rs 1 Lakh: This claim is covered by the super top up plan since the cumulative total of claim 1 and claim 2 exceeds the basic cover amount.
Claim 3 – Rs 4 Lakhs: The super top up plan will also cover the claim of Rs 4 Lakhs since the basic coverage amount has already been surpassed.

There is a deductible associated with a super top-up plan. The insured/policyholder must choose a deductible level above which the super top-up plan can be used(as per the policy terms and conditions). Let’s take an example to understand better:

Suppose you purchase a super top-up plan with a maximum sum insured of Rs 10 lakhs with a deductible of Rs 5 lakhs. Besides this, you have coverage of Rs. 5 lakhs with a base health policy. You were then admitted to the hospital, and the medical bill came up to Rs. 5 lakhs. The insurer only paid out Rs 3.5 lakhs from the base health policy, out of a total of Rs 5 lakhs. Since the medical cost does not surpass the deductible, you would not be able to use the super top-up plan on the first claim. You can, however, use the super top-up plan for future claims.

If you have a super top-up plan, it will cover future claims because the insured has spent a total of Rs 5 lakhs on medical expenses. It makes no difference who paid for these costs, whether it is the patient or the base health plan.

What if you want to make another claim?

You may use one of the policies, either the base policy or the super top-up health insurance, to resolve the second claim or any additional claims within the same year. The base policy sum of Rs 1.5 lakhs will remain eligible, and the super top-up will become active once the hospitalization costs of Rs 5 lakhs have been paid.

Benefits of a Top Up Health Insurance Plan

Just like any other insurance policy, a top up health insurance plan offers unique benefits. Some of these benefits include:

• Top up policies are cheaper in comparison to general health insurance plans in cases where the deductible is higher.
•  Top up plans can be purchased easily without any constraints. Furthermore, the base health insurance plan and the top up plan can be purchased from different insurance providers.
• These plans offer greater benefits in the form of low cost and high sum insured. This feature is highly advantageous for older people since their probability of falling sick is greater.
• As is the case with other health insurance plans, a top up plan also offers tax benefits on the premium paid towards health insurance, which is included under Section 80D of the Income Tax Act.

A top up health insurance policy plays a supporting role to the basic health insurance plan and protects you from additional medical expenses in case of massive hospital bills. However, despite the advantages offered by a top up health insurance plan, you should not buy one on a whim. Instead, take your time, research the available options, study the policy papers to understand the terms and conditions, and then opt for a plan from a reputable insurance provider such as Care Health Insurance . Doing so will ensure that your financial requirements are met appropriately and on time.