Health Insurance Top-Up Plans

Top-up plan:

A top-up policy is applicable on a per claim basis and kicks in only if the claim amount is more than the cover of your health insurance plan. For example, if you have a top-up plan, then in case of hospitalization if the bill amount exceeds the cover of your health insurance plan, then you can claim the differential amount from the top-up plan for that particular claim.

Super top-up plan:

Super top-up pays the amount if due to repeated claims you have exhausted the yearly cover provided by your base health insurance. It works at an aggregate level and kicks in as in when you have used your base policy amount. So, unlike a top-up plan, there is no threshold at a particular claim level.

Let us understand the plans with an example:

Policyholders A and B are hospitalized and have a top-up and super top-up policy respectively of ₹ 5 lakh over a basic health policy of ₹ 3 lakh. Say the claims that happen to both for a particular year are ₹ 3 lakhs, ₹ 1 lakh and ₹ 4 lakh.

Advantages & disadvantages of health insurance top-up plans

The two advantages of top-up policies over increasing the coverage amount for the existing health insurance policy are –

1. Top-up plans are more cost-effective: Buying a top-up plan is much more cost-effective than increasing the base cover of the existing health insurance plan. And that is the primary reason for some people preferring to buy it instead of increasing the base cover for the existing health insurance plan.
   Say, you have a health insurance policy of ₹ 3 lakh for which you are paying a premium amount of ₹ 6,000/- every year. But, you feel that the coverage amount is not enough and you should have at least ₹ 5 lakh as the coverage amount. Now, if you decide to increase the coverage of your existing plan from ₹ 3 lakh to ₹ 5 lakh, the premium amount for the policy would be ₹ 10,000/- annually. Meanwhile, in case you already have a health insurance policy, then the premium amount for top-up plans is usually ₹ 1,000/- per lakh cover. Hence, for an extra ₹ 2 lakh cover, you will have to pay an additional premium of ₹ 2,000. The total premium for the policy and the top-up plan combined would be ₹ 8,000 per year and cheaper than the earlier option.
2. Limited increase of coverage amount: If you want to increase the sum assured for your health insurance policy, you can only increase that to some extent. Each health insurance company determines up to what limit it will allow its policyholders to increase their coverage amount. But, if you buy top-up or a super top-up plan, you can decide what cover amount you want to buy.

The two disadvantages of top-up policies over increasing the coverage amount for the existing health insurance policy are –

1. Top-up plans have a waiting period: Since top-up plans are bought as a separate plan so they have a waiting period during which you cannot make any claims. For example, like a health insurance policy, top-up plans have an initial waiting period of one month, during which you cannot make any claim. Then some top-up plans come with a one-year waiting period for specific diseases like tonsils, hernia, cataract, etc., during which you cannot make any claim for those specific illnesses mentioned in the policy. Also, if you have any pre-existing ailment, there is a waiting period of two to three years.
2. You can't avail the 'no-claim benefit' for a top-up plan: For every claim-free year, your health insurance company rewards you by increasing your coverage amount or decreasing your yearly premium amount. This benefit is called a no-claim bonus. But, the top-up plans do not come with the no-claim bonus benefit. If you want to increase your cover amount for top-up plans, then you will have to buy more cover.

Jio Insurance Broking point of view on Health Insurance Top-up Plans:

Health Insurance Top-up plans are an excellent way to increase your health insurance coverage amount. But before buying a top-up plan, it is imperative that you read the policy papers carefully to understand the term and conditions so that you do not face any difficulty during the claim process.