The main difference between a top-up cover and a regular health insurance policy is that top-up plans can be used only in case expenses incurred are beyond a certain limit. This limit, known as the deductible is decided beforehand and premiums are calculated accordingly. A top-up plan with a higher deductible has a lower premium attached to it.
Another criterion is that a top-up plan normally works only on a single incidence of hospitalisation. This means that you can use the top-up plan only if your medical bills exceed the deducible during a single hospitalisation by a single member.
How it Works
Let us assume you have an existing health insurance policy with your employer which covers you and your family to the extent of Rs 3 lakh. If your wife is hospitalised during the year and expenses amount to Rs 4 lakh, then you must bring in Rs 1 lakh from your savings.
Now, let us assume you have taken a top-up insurance for Rs 5 lakh with a deductible of Rs 3 lakh. In this case, the extra Rs 1 lakh, which is over and above the limit of Rs 3 lakh from your existing policy, will be paid by the top-up policy. If you incur expenses of Rs 8.5 lakh, then the maximum amount that can be claimed is Rs 8 lakh (Rs 3 lakh from the existing policy and Rs 5 lakh from the top-up policy). The extra Rs 50,000 needs to be paid from your savings.
Now, assume another scenario. You have an existing policy of Rs 3 lakh and a top-up policy of Rs 5 lakh with a deductible of Rs 3 lakh. Your wife gets hospitalised twice in a year with bills of Rs 2.5 lakh and Rs 2 lakh each. Then the top-up will not be triggered in both cases. Further, if both your wife and son are hospitalised with expenses of Rs 2.5 lakh each during the year, even then the top-up will not be triggered.
The top-up policy can be bought from the same or different insurers.
Top-ups are available for both individual and family floater policies.
Pre-existing illnesses are generally not covered for a certain number of years. Basic exclusions, coverage and age limits depends on each insurer.
Premium paid towards top-up policies are eligible for tax deduction under Section 80D.
Top-up plans are not riders which usually can be bought with health insurance policies, which include hospital cash, personal accident and critical illness covers. Top-up plans have similar features as a regular health insurance plan, except for the higher amount of deductible.
A top-up plan is a cheap and easy option to increase your health cover, rather than being burdened with many health insurance policies.
— Author is CEO, BankBazaar.com