A top-up plan is useful only if you already own a base plan

Published in Mint on 18th February 2014, Written by Kapil Mehta

I am 33 years old. I am covered along with my family (wife and child), for Rs.4 lakh through my company’s group mediclaim policy. I am considering taking a personal cover as well. Would you recommend going for a top-up insurance plan? Not all insurers seem to offer it. Are there any particular disadvantages or caveats to keep in mind when considering a top-up plan?

—Rahul
I recommend that you do not depend on your company for health insurance and buy a regular health plan. So many things can change over the years—you may move to a company without health insurance, your company may reduce health insurance benefits because of cost, they may restrict cover to only employees, and so on. Think of your company’s cover as an additional safety net to be used if you fall ill.
A top-up plan is useful if you already own a base plan but would like to supplement the sum assured. There are two distinct top-up structures. The more common structure is one where hospitalization costs for a specific incident above a pre-determined deductible or threshold are paid. This is useful to mitigate the risk of a single ailment that has very high costs. The second structure, which I prefer, is one where the top-up plan kicks in whenever the deductible amount is consumed. It does not matter if the deductible is used up in one hospitalization or several. Premiums in these top-up structures are higher.
Consider a case where you are hospitalized thrice for different ailments and each hospitalization costs Rs.3 lakh, i.e. a total of Rs.9 lakh. If you buy a top-up plan with the first structure and with a deductible of Rs.4 lakh then you will not be paid anything because each hospitalization is less than Rs.4 lakh. However, had you bought a top-up with the second structure you would have received Rs.5 lakh. That’s why I prefer the second structure even though it is more expensive.
I recently underwent a critical illness treatment. It was covered by my insurer. The insurer paid on time as well. However, I plan to switch to another insurer for better services and my renewal is early next month. What should I do?
—Mahi Gulati
Retain your existing insurance. Other insurers are unlikely to offer you a similar cover if you have had a critical illness. Regulations require your current insurer to renew your insurance for lifelong and with no specific premium loading or restrictions for you. However, you should consider enhancing your insurance by purchasing a top-up cover or additional insurance. There is no guarantee that you will get this additional insurance but at least you will have your basic policy as a fall-back option

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