If you have a car, you would know the risk of driving without a spare tyre. Till 1904, car drivers dreaded punctured tyres. Then a simple idea by Thomas Morris Davies of the UK revolutionised things - he added a spare so that if the tyre got punchured, you had a ready-to-use stand-by.
Top-up health plans have a similar role. They are a stepney to your health reimbursement policy after you exhaust the sum insured limit.
A regular policy reimburses hospital bills up to the sum insured while a top-up plan covers costs after a certain threshold is reached.
In simple words, when you are hospitalised, the insurer will pay up to the set sum insured limit. The top-up, on the other hand, will kick in only after a certain amount, say, Rs 2 lakh has been crossed. It'll pay for the claim amount over and above it.
"A top-up health policy is an additional coverage for people who have an existing individual plan or a mediclaim from the employer. It is for reimbursement of expenditure which arises out of single illness beyond the limit of the existing cover," says Deepak Yohannan, CEO, MyInsuranceClub.com.
WHEN IT MAKES SENSE
Suppose you have a cover of Rs 5 lakh. However, looking at the soaring healthcare costs, you know this won't suffice in a big emergency and want to enhance it by another Rs 5 lakh.
You can buy a separate health policy (which will cost around Rs 6,000 a year) or request your insurer to upgrade the plan by Rs 5 lakh. Both are expensive options. A top-up plan for Rs 5 lakh, on the other hand, will cost just Rs 2,000 a year.
So, a top-up plan makes sense when you want to increase the cover without paying too much.
However, it will probably have a huge threshold limit, sometimes as high as the sum insured itself. For instance, the Super Surplus 1000000 top-up plan from Star Health insurance has a sum insured as well as the threshold limit as Rs 5 lakh. This mean, the policy benefit of Rs 5 lakh will only kick-in once you have already incurred hospitalisation costs of Rs 5 lakh either with your base health policy or made payments out of your pocket.
"Though it is not compulsory to have a health reimbursement policy to buy a top-up plan, it is futile to take a top-up policy unless you have reimbursement cover equal to at least the threshold limit of the top-up plan. This way you will be able to take care of your bills even before the top-up plan kicks in," says Akshay Mehrotra, chief marketing officer, Policybazaar.com. This applies even if you have a group heath cover from your employer. If the employer's cover has a sum insured of Rs 2 lakh, don't buy a top-up plan with a threshold of more than Rs 2 lakh.
WHAT'S ON OFFER
Many confuse health top-ups with riders like hospital cash, critical illness and personal accident covers-all definite-benefit plans. In reality, top-up health plans are indemnity policies and provide the same benefits as regular reimbursement plan.
The only difference is the high deductibles that make these plans cheaper. The underwriting may differ slightly as the base policy reduces risk for the insurer.
"Typically, small illnesses take up most of the claim and are covered in the primary product. Thus, companies expect a safer top-up consumer bucket," says Mehrotra.