Ms.Sood had a major operation for which she submitted claims worth Rs 9 lakhs. Her insurance policy had a threshold limit of Rs 6 lakhs and when her colleague asked how she would manage the rest of the expenses, Ms.Sood said that she has a top-up plan.
A regular health insurance policy has a sum insured limit, beyond which it does not cover any expenses. This is when a top-up policy is useful, it becomes effective soon as the sum assured from a health plan is exhausted. Therefore, Ms.Sood can claim the balance amount of Rs 3 lakhs from her top-up health cover. So essentially, she has a top up plan with a deductible of Rs 6 lakhs.
The Advantages of Top Up Cover
One can argue that instead of opting for a top up, a higher cover can be obtained from the insurance provider. That can be done, but a higher cover would also increase the premium amount.
Since top up plans have a high deductible, insurers consider them less risky and they are made available at relatively low rates. In fact, the higher the deductible, the cheaper the plan. An individual can purchase a top up plan even if does not have a regular health insurance policy.
Investing in a top up cover is quite simple as a policyholder can get it from any company and not necessarily from the existing insurer. It is available as an individual policy as well as a family floater.
Additionally, there is no contribution clause if a policyholder has a top up policy in addition to a regular plan and both the providers are liable to pay their share. However, top up covers have restrictions on pre-existing diseases, pre and post hospitalization expenses, and some providers might exclude certain conditions from their plans.
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Super Top Up Cover
A super top up comes to the rescue when a single claim does not cross the threshold limit of the regular policy, but multiple claims do. Thus, if MsSood submitted two different claims of Rs 4 lakhs and Rs 5 lakhs respectively, the top up plan would be useless since none of them exceed Rs 6 lakhs individually.
Her regular health plan would reimburse the first claim completely and give her Rs 2 lakhs for the second one. If Ms.Sood had a super top up plan, then all her claims would be reimbursed as it considers the total of all the bills submitted.
Even if Ms.Sood submitted two claims of Rs 7 lakhs and Rs 2 lakhs each, the top up would not have covered the entire expense. It would have reimbursed Rs 1 lakh on the first claim and dismissed the next as it does not exceed the deductible. A super top up would be useful as it would take into account the total amount.
Group Insurance Plans
Most organizations offer a medical cover to their employees. However, each individual has different requirements and someone might feel that the organization’s insurance policy is insufficient for his/ her requirements. In that case he/she might opt for a top up or a super top up plan.
So if the health insurance policy offered by the employer has Rs 3 lakh sum assured and an employee feels that it will not meet his/her requirements, he/she can purchase a top up with Rs 3 lakhs as deductible.
With medical expenses and hospital charges on the rise, it makes sense to invest in a top up or super top up policy, in addition to a base plan. Also, premiums paid for either are eligible for income tax deduction under Section 80 D.