An insurance policy needs to be an integral component of overall financial planning. It is, therefore, crucial for you to understand the difference between a base health insurance plan and a top-up plan.
To begin with, a base or basic primary health insurance plan is a standalone policy that covers you against any medical emergency. It is designed to offer financial coverage against various healthcare expenses up to a certain predetermined amount. The health insurance policy provides coverage for hospitalisation and treatment costs incurred up to the sum insured amount that you may have opted for, as per terms of the policy.
On the other hand, a top-up plan is an extended cover, which is over and above your existing base health insurance plan. It offers an additional sum insured amount which can be used in case you completely spend the current coverage of your basic insurance plan.
Top-up health plans can be purchased over and above your existing base health insurance policy. It cannot be purchased independently, however.
Taking into account the ever-increasing rise in medical expenses, having an insurance policy with a top-up plan is an added advantage as it ensures increasing the sum ensured amount above your base primary health insurance plan.
For instance, let’s assume you purchase a health insurance cover of Rs 5 lakh. The health insurance policy effectively covers you and your family comprising your spouse and children.
However, knowing that a standard cap of Rs 5 lakh would not be sufficient to address a more significant health emergency, and you wish to extend the limit by Rs 8 lakh.
There are two options in such a scenario. You can either purchase new health insurance that provides cover worth Rs 8 lakh. The premium for the policy would be, say, Rs 8,000. Or you may ask the insurer (insurance company) to upgrade the cover from Rs 5 lakh to Rs 13 lakh.
However, another approach would be to ask any insurer for a top-up cover of Rs 8 lakh on the existing policy. In such a case, the premium would be lower than the new one, say, Rs 5,000, or the upgrade option. *
Top-Up Health Insurance Plan: How Does it Work?
Considering the above-mentioned example, you now have the basic health insurance cover of Rs 5 lakh and the top-up plan of Rs 8 lakh. In case you or a family member undergo some medical procedure and incur an expense below Rs 5 lakh, your base health insurance will cover the costs. However, if the medical bill goes a notch higher to about Rs 7 lakh, the top-up plan could effectively cover the additional Rs 2 lakh. *
Top-Up Health Cover: Features
A top-up health cover is easily convertible to your primary health insurance cover.
It has a compulsory deductible amount, which refers to the limit set by the insurer. An additional coverage could be gained only after paying the same.
Therefore, it is only after the exhaustion of the base sum assured can you avail the benefit of the top-up coverage.
Generally, top-up health policies provide coverage for in-patient hospitalisation and pre as well as post-hospitalisation charges.
It remains a prudent decision to avail of a top-up plan at a young age because if you are below 55 years of age, then there is no need to undergo additional medical scrutiny.
Also, there are no sub-limits on medical expenses such as fees of a medical expert, room rent, etc.
There are a few plans, which may also offer a family discount, which covers your spouse, children, parents and/or in-laws.
A tax rebate can be claimed on the premium amount under Section 80D of the Income-tax Act (ITA), 1961. * All the tax laws are subject to change.
Purchasing Top-Up Plan: Things to Keep in Mind
First and foremost, keep an eye on the fact there is no duplication in the benefits offered by your primary health cover.
A number of the exemptions in such top-up plans will be covered by your primary health insurance policy. Perhaps, there is no need to think much about the same. There is, however, a need to check the waiting period on the top-up in case there exist any pre-existing medical conditions.
Also, you should also ensure adequate coverage in terms of maternity care, any additional deductible criteria with regard to a particular illness. *
Top-Up Insurance Plans and Benefits
Keeping a tab on medical inflation: In the past few years, medical expenses have witnessed a significant jump. Generally, a basic mediclaim policy may not be sufficient to provide ample protection for you as well as your family. In such cases, it is advisable to opt for a top-up plan as it takes care of medical expenses after exhausting your base cover. This way, there would be no need to reach out to savings. *
Ensuring a rise in the sum insured: While purchasing a top-up plan, you are offered an opportunity of raising the sum insured at a minimal cost. It is possible to maintain your basic insurance cover at the same time saving you from paying additional premiums for either a new policy with a higher cover or simply upgrading the existing coverage. *
Beneficial for senior citizens: When it comes to senior citizens, top-up health insurance plans tend to offer improved and more comprehensive protection when compared to a base policy with a higher sum assured. In addition, many of the top-up plans have no sub-limits or restrictions on hospital costs, which makes it ideal for individuals of the 60 and above age bracket who may require frequent medical care. *
Cumulative bonus: In case you do not use your top-up plan during the policy tenure, you can get a cumulative bonus, which is a pre-set percentage, for each claim-free year. *
Wrapping it up
A top-up health insurance plan remains essential to meet the difference between the actual medical expenses and your existing health cover. Opting for an additional top-up cover is a feasible and affordable option if you are covered under a group mediclaim policy or an individual cover. However, never opt for any plan when in doubt. In case of any confusion at any stage, it is important to seek the advice of a professional expert.
* Standard T&C Apply
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.