Published in Economic Times
If you have a health insurance policy with a comparatively low sum assured, you can consider buying a top-up insurance plan. A top up plan increases the insurance coverage over and above your existing base policy at a comparatively lower cost as compared to increasing the sum assured in the base policy.
The top-up plan will come to your rescue in case your medical insurance claim crosses a threshold limit (also known as a deductible). What this means is that the top up plan becomes active only when the claim amount is higher than the top-up deductible.
Under a top-up plan, a deductible is the limit up to which the healthcare costs are borne by the insured or the policyholder depending upon the type of insurance policy.
Types of top-up plans
“There are two types of top-up plans. One where deductible is applied on each medical insurance claim separately. The second type, known as a super top-up plan, is where the deductible is applied on the total admissible claims in one year. People should be careful with what they are buying – per claim deductible or annual total based deductible,” Biresh Giri, Appointed Actuary, Head of Product Development & CRO, Acko General Insurance said.
- Regular top-up plan: This type of plan offers additional coverage beyond the deductible/threshold limit. The deductible in a top up plan is often/usually kept equal to the existing health insurance policy. In such top-up plans, the deductible is applied on single hospitalisation or per claim basis in a year, that is, a top-up plan covers only a single claim above the deductible. So, if your first, second or any subsequent hospitalisation bills do not exceed the deductible, the top-up plan will not help you get the claim settled for those medical expenses.
How regular top-up plan works
When you claim from a base health policy and a basic/regular top-up plan
Here, your insurer generally links the top-up plan deductible with your base health policy (as per the policy terms and conditions).
For instance, if you bought a top-up plan with a maximum sum insured of Rs 10 lakh which has a deductible of Rs 5 lakh, and you also have a base health policy of Rs 5 lakh. You were then hospitalised for which the medical bill came up to Rs 5 lakh. Out of Rs 5 lakh, the insurer only settled a claim of Rs 3.5 lakh from the base health policy (assuming that the insurer did not pay for proportionate deduction, co-pay, sub limits and other non-medical expenses amount).” Giri explains, in such a situation, consider the following scenarios:
“First, you cannot use your top-up plan to settle the balance amount of your medical bills, as the claim amount is less than the top-up deductible. Now, if a second claim of Rs 4 lakh is triggered in the same year, it will again not pe paid under the top-up policy since the sum insured under the base health policy is not exhausted. This way if a second claim arises, it will have to be lodged under the base health policy first,” Giri said.
Moreover, since again the second claim amount is less than the top-up deductible, the balance amount will not be paid under the top-up plan.
- Super-top up plan: A super top-up plan covers the total of all hospitalisation bills (up to the super top-up plan limit) above the deductible amount, that is, the deductible is applied to the total claims in one year. Hence, once the deductible is paid, the plan becomes active for subsequent claims.
How super top-up plan works
When you claim from a base health policy and super top-up plan
As mentioned above, the super top-up plan comes with a certain deductible. The insured/policyholder has to choose the deductible limit above which the super top-up plan would become active (as per the policy terms and conditions).
Let us say you bought a super top-up plan with a maximum sum insured of Rs 10 lakh which has a deductible of Rs 5 lakh, and you also have a base health policy of Rs 5 lakh. You were then hospitalised for which the medical bill came up to Rs 5 lakh. Out of Rs 5 lakh, the insurer only settled a claim of Rs 3.5 lakh from the base health policy (assuming that the insurer did not pay for proportionate deduction, co-pay, sub limits and other non-medical expenses amount). In such a situation, you cannot use your super top-up plan for the first claim as the medical bill did not exceed the deductible. However, you can use the super top-up plan for subsequent claims.
“If you have a super top-up plan, it will provide coverage for subsequent claims, as total Rs 5 lakh of medical expenses have been incurred by the insured. It doesn’t matter who paid for these expenses (base health policy or the patient),” said Chandan D. S. Dang, Executive Director, SecureNow.in, a Delhi-based online insurance broking firm.
Besides, the standard inclusions and exclusions will also apply on the respective claim amounts as per specific policy terms.
Now, what if you want to make a second claim?
For the second claim, or any subsequent claims during the same year, the policyholder can use either of the policies (base or super top-up) to settle the claims. The base policy amount of Rs 1.5 lakh will still be available, and the super top-up will become active since Rs 5 lakh of the hospitalisation expenses have already been incurred.
“For convenience, you may invoke only the base health policy if the second or subsequent claim amount is up to Rs 1.5 lakh, and only the super top-up if the claim amount say, is between Rs 1.5 lakh and Rs 5 lakh (assuming the ‘net coverage’ of Rs 5 lakh is fully available in the super top-up plan). You can also choose to use both policies if the amount cannot be covered by either policy alone,” Dang said.
What should policy buyers know?
Experts generally suggest that you must buy a super top-up/top-up plan with a deductible equal to the sum assured under your base health policy. This is because when any claim arises, you can use your existing base health policy to pay medical bills up to the deductible and then make a claim using the super top-up/top-up plan for the remaining amount.
You must know that both super top-up and top-up plans, and base health policies work on the ‘claim payable basis’. Claim payable for any policy is decided based on coverage terms and limits such as room type, sub-limits, waiting periods, the sum insured etc. In some cases, both base policy and top-up policy may have the same terms and conditions but, in many cases, it may be different.
Giri said, “In any case, the super top-up/top-up plan will first evaluate the claim payable amount for any claim based on its coverage terms concerning room type, sub-limits, waiting periods etc. If the top-up deductible is Rs 5 lakh and after applying all the top-up cover rules if the amount assessed is more than Rs 5 lakh, then the amount above Rs 5 lakh will be payable in the top-up policy up to its sum insured.”
Rakesh Goyal, Director, Probus Insurance, online Insurance Broking firm, said, “If you have a co-payment clause under your base health policy, you will have to share the hospital expenses with the insurance company. For example, if your policy has 10 per cent co-payment then you must share 10 per cent of the hospitalisation cost or admissible claim.”
What can existing policyholders do?
Experts say that if you already have a base health policy or are already covered by your employer under a group mediclaim policy, then you may consider buying a super top-up plan instead of a top-up plan.
Unlike a top-up plan where the deductible limit applies afresh to each claim, in the case of super top-up plans, the deductible limit applies to the total medical expense admissible under the super top insurance policy, incurred during the year.
This simply means that top-up plans work on per claim basis. Therefore, the plan is beneficial if you have made a single claim over and above the threshold limit/deductible limit.
“The super top-up plan becomes active when you have incurred cumulative expenses in an year (admissible for claim under the policy) equal to the deductible/threshold limit (as per the policy). It does not matter who paid for the initial expenses – it could be the patient or their base health insurance policy. Therefore, you can consider buying a super top-up with base health policy to avoid confusion related to deductibles,” Dang explained.
Points to note
If your medical expense/bill is less than the deductible/threshold limit, then a super top-up or top-up plan will not become active for any claim.
When you buy a super top-up/top-up plan, you must look for the ‘net coverage’ under the super top-up/top-up policy and know the deductible separately. Amit Chhabra, Head- Health Insurance, Policybazaar.com said, “If an insurer says that the top-up policy has a maximum coverage of Rs 10 lakh then the policy may include Rs 5 lakh as deductible (the amount that has to be borne by the policyholder) and Rs 5 lakh as net coverage (actual base sum insured of the policy). The threshold limit/deductible may vary from policy to policy.”