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Have A Back-Up Plan

Chandralekha Mukerji | Print Edition: July 2012

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.

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A top-up health policy is an additional coverage for people who have an existing individual plan or a mediclaim from the employer.

Deepak Yohannan

CEO, MyInsuranceClub.com

Also, in top-up policies, most insurers do not ask for medical check-ups up to the age of 55 years. In reimbursement plans, this is usually 45 years.

Riders in usual policies cover a few serious illnesses whereas top-up policies cover all treatment costs due to hospitalisation. Moreover, while riders or add-on covers belong to particular policies and can be taken only with them, top-up plans are independent covers that can be bought separately from the existing policy. This means you can buy regular hospitalisation reimbursement plan and top-up cover from different insurers.

Both your indemnity policy and the top-up plan can be claimed together for single hospitalisation. The only condition to be met is the threshold of the top-up plan.

"There is no contribution clause (for claiming on a pro-rata basis when one has more than one health policy). So, if a policyholder has two health policies (one indemnity and the other a top-up plan) from two different insurers, each insurer is liable to pay its part of the claim," says Satkam Divya, business head, Rupeetalk.com.

CRITERIA AND CLAUSES

Apart from having a high deductible, a top-up plan generally covers only single incidence hospitalisation. That is, if your hospital bill exceeds the deductible during single hospitalisation, only then can the top-up plan be used. For instance, if a person has a top-up cover with a threshold of Rs 3 lakh and gets hospitalised twice in a year with bills of Rs 2.5 lakh and Rs 2 lakh, respectively, the top-up plan will not be triggered.

The same is the case with a floater plan under which two members are hospitalised with individual bills of Rs 2.5 lakh each.In addition, there may be a single illness clause as well as specific guidelines on what is considered single illness.

"If relapse happens within 45 days of discharge from hospital, it is usually considered single illness. However, if the customer is hospitalised again for the same illness but after 45 days from discharge, it is usually considered a fresh illness," says Yohanan. So, the deductible has to be crossed for every single illness for policy benefits to commence.

PICKING A PLAN

The higher the deductible, the cheaper will be the plan. But top-up health plans are meant to bridge the gap between existing policies and actual costs. The idea is not to duplicate but buy extra cover at a reasonable cost. So, exclusions such as day care and dental treatment will not make a big difference as they will be taken care of by your base health policy.

However, do not forget to check the deductible criteria for single illness, waiting period for pre-existing diseases, limits inclusive of donor expenses, pre- and post-hospitalisation expenses and understand the criteria for single illness.

"There should be clarity whether the plan mandates per-claim deductible or overall deductible," says Sanjay Datta, chief, underwriting and claims, ICICI Lombard. Also, check who all can be covered. Many policies will disappoint if you want to include parents as well.

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