Top-up Health Insurance: Are Top-up Plans Beneficial?

Is your existing Health Insurance enough? Have you considered if your base policy covers your requirements or that of your family as well? One alternative is to increase your coverage, which can be very expensive. Another viable option is to purchase a Top-up policy. Also read: Important things to know about Top-up and Super Top-up Insurance plans

A Top-up Health Insurance policy offers additional coverage over and above any Individual Health Insurance plans or Mediclaims you may have. Top-up Health Insurance plans work as supplementary protection or add-on coverage to your existing Health Insurance plan, which may not be sufficient to cover the rising medical costs. The plan acts as an indemnity policy, providing extra financial security when your existing Health Insurance falls short of covering high medical expenses.You can think of your Top-up plan as a stepney for your health policy–the policy kicks in when you have exhausted the sum insured limit. While your existing policy reimburses your hospital bills up to the specified sum insured, a Top-up plan comes into effect above a threshold, covering expenses beyond this threshold limit.Let's understand with an example. Suppose an unfortunate incident leads to your hospitalisation. The cost of your treatment, doctor charges, tests, etc., comes to ₹9 lakh, and your Health Insurance covers ₹5 lakhs. Here, you will have to pay the balance ₹4 lakhs from your pocket.Now let's assume you also have a Top-up cover of ₹10 lakhs, implying that you have a total cover of ₹15 lakhs (base cover of ₹5 lakhs + Top-up of ₹10 lakhs). In this case, the Top-up plan takes care of the balance bill amount of ₹4 lakhs, and you do not have to pay anything out of your pocket. But remember, your Top-up plan activates after your base sum insured of ₹5 lakhs is exhausted. So, it covers all your expenses beyond your base health coverage.Also, note that you cannot buy a Top-up plan as a standalone policy. It is a supplementary policy to an existing health plan. Also read: Understanding insurance: Its features, types, and benefits

Enhanced coverage:

A Top-up health policy extends the coverage beyond the sum insured of your base Health Insurance policy. It provides a higher limit for medical expenses, safeguarding you against the burden of medical treatments.

Deductible option:

Top-up coverage typically kicks in only after you meet the deductibles limit, i.e., the portion of medical expenses you pay out of your pocket. For example, if you have a top-up plan with a deductible of ₹2 lakhs and incur medical expenses of ₹5 lakhs, you will be responsible for paying the first ₹2 lakhs, and the top-up plan will cover the remaining ₹3 lakhs. The part you pay as a deductible depends on your base health policy.You can select the deductible amount based on your personal preference and financial capability.

Tax advantage:

The premium you pay for your Top-up Health Insurance plan can reduce your tax liability as per Section 80D of the Income Tax Act. If you pay the premium for a plan covering yourself, your spouse, and your children, you can claim a maximum deduction of ₹25,000 under Section 80D. If you pay insurance premiums for your parents, who are aged 60 years or more, you can claim deductions of up to ₹50,000. But these deductions are applicable only if you file returns under the old tax regime.

A Top-up policy is always in addition to your existing Mediclaim or Health Insurance policy. It is essential to review the following factors before selecting a Top-up plan that is suitable for you:

Waiting period:

You must know that a Top-up Insurance policy is a separate Health Insurance policy and can have a waiting period for specific pre-existing diseases. You cannot make any claims related to those conditions during the waiting period. The duration of the waiting period may vary depending on the Top-up plan you choose.

Deductible amount:

Top-up Health Insurance plans usually have a deductible. You must assess whether you can afford the deductible when your base policy sum insured is exhausted.

Co-payment clause:

A Top-up plan may include a co-payment clause, in which you bear a portion of the medical costs while your Health Insurance company covers the remaining amount. You must consider such clauses before opting for a Top-Up plan to enhance your health coverage.

Medical tests:

If you are below 55 years of age, you do not require additional medical tests when opting for a Top-up plan. Therefore, consider purchasing such a plan at a younger age to enjoy more comprehensive coverage for an extended period.

Sub-limits:

A Top-up policy does not impose restrictions or sub-limits on medical expenses like doctor's fees or room rent. Thus, the policy provides greater flexibility and coverage.

No Claim Bonus:

A Top-up plan does not have the No Claim Bonus feature. No Claim Bonus is typically a part of Comprehensive Health insurance plans under which your insurer rewards you with a bonus or an increase in the sum insured for every claim-free year. With Top-up plans, you can enhance coverage by purchasing additional coverage separately.

• A Top-up Mediclaim policy extends your cover beyond the sum insured by your existing Health Insurance policy. It kicks in once you have exhausted the coverage under your existing health plan.
• It provides a higher limit for medical expenses, shielding you from the higher cost.
• You cannot buy a Top-up plan as a standalone policy. You need a base health cover to buy the Top-up.
• A Top-up plan includes a deductible and covers only one hospital stay. It means you can use your Top-up plan if a single hospital admission results in a bill that exceeds the deductible.
• A Top-up plan does not offer the benefits of a regular health Policy like a No-Claim Bonus.
• It is popular for those who want to extend their cover, but it comes with a waiting period, during which you cannot make a claim.