Rider or top-up?

Go for add-ons when you know the cost of treatment. When costs can run high, increase hospitalisation cover

Most health insurance policyholders in India cover themselves for a maximum of Rs 3 lakh. But, in the case of hospitalisation for any kind of ailment, it can burn a hole in your pocket. This apart, experts say, yearly medical inflation stands at 15-18 per cent.

Health insurers offer options such as rider or add-on covers and top-up covers. But choosing between the two can be difficult for policyholders. Top-up policies are regular indemnity plan covering hospitalisation but only after a threshold limit, known as deductible. Deductibles are not covered by the insurance company and has to be paid by the insured (it can start at Rs 1 lakh). Deductible clause make top-ups cheap as smaller claims don’t need to be paid by the insurer. Whereas a rider is an attachment or amendment to an existing health insurance policy for defined problems such as Hospital Cash, Maternity Cover, New Born Baby Care and so on.

The math isn’t difficult. Amarnath Ananthanarayanan, CEO of Bharti AXA General Insurance, says, “Simply put, when you know the estimated cost of treatment, opt for a rider. And, when won’t know and it can run quite high, opt for a top-up cover.” When the severity of the illness is high like a heart problem, which can push your basic treatment cost to Rs 5 lakh or more, you need a top-up cover. “Given Indians do not buy sufficient health insurance, both riders and top-up plans can be bought,” says  Ananthanarayanan. Bajaj Allianz General Insurance’s top-up Extra Care costs Rs 2,500 for a 30-year old — sum insured is Rs 10 lakh and deductible is Rs 3 lakh. But their regular indemnity policy, Health Guard costs Rs 10,913 for a sum assured of Rs 10 lakh. In comparison, their Hospital Cash cover will cost Rs 1,100 for a Rs 2,500 coverage per day for 30 days. It will cost Rs 1,800  for a Rs 2,500 coverage per day for 60 days. Hence, a top-up policy is a low-cost investment. Top-up policies come as individual and floater plans. A floater plan covers more than one individual in a family and considers the number of people covered as one unit.

You can also buy a top-up cover on employer-provided group plans. Experts say employees of big companies would be paying Rs 6,000-7,000 annually for a Rs 5-lakh top-up cover for parents. This could be higher by Rs 2,000-3,000 for smaller companies. However, you cannot choose the sum assured. It will depend on the deal between the employer and insurer. As for claiming from top-ups, it depends on the design of the top-up policy, says Manasije Mishra, CEO of Max Bupa Health Insurance.

"Traditional top-up plans pay the difference between base and top-up policy only for individual claims that exceed the base policy. Each individual claim needs to be more than the base policy. Whereas super top-ups get activated once the cumulative claims during the year exceed the amount of the base policy."