Pankaaj Maalde of Apnapaisa elaborates on the need to have a top up plan, over and above the health insurance plans that one possesses.
Pankaaj Maalde ( more)
Head - Financial Planning
One afternoon, a friend of mine came to my office to clear his doubts on health insurance cover. Looking very disturbed, he narrated his story: “Look, I and my family are covered for Rs. 3 lakhs health insurance individually, but I think that the same is not sufficient.”
The reason behind this concern was his recent trip to hospital where one of his relatives was admitted since last 10 days. He had met with a major accident at Pune express way and the total hospital bill till date was approx. Rs 13 lakhs. He wanted to know how much cover one should have.
He was already paying premium of Rs. 18,000 p.a. and it was not possible for him to allocate more than double amount immediately. He curiously asked: Is there any way out? The question was very genuine and relevant to all of us as we have to cover for each and every uncertainty in our life.
To begin with, most of people who have opted for at least Rs. 3 lakhs sum assured policy are now realising that the cost of the medical is rising at higher percentage. This amount may be sufficient for minor surgery or illness but not for critical illness or major accident. The rising medical expenses need also to be considered while opting for health cover.
This is when the new version of health insurance plan, i.e. Top Up plan should be considered which covers higher sum assured. The premium payable is also low, hence becomes affordable.
Top Up plan is add on health insurance plan which comes into picture only when the single claim is above certain deductible limit. The plan comes with minimum deductible of Rs. 1lakh to Rs.5lakhs depending on the plan.
Deductible means the policy will be eligible for claim only above deductible limit. Normally deductible does not reduce sum assured. Deductible is the amount over which the claim for each hospitalisation is reimbursable.
For example: You have a basic health insurance of Rs. 3 lakhs and also buy a top-up policy of Rs. 10 lakhs with deductible of Rs. 3 lakh. In the event of a serious hospitalisation with a claim of Rs. 13 lakhs; Rs. 3 lakh will be paid by your base plan and Rs. 10 lakhs will be paid by your top up plan.
The plan is normally beneficial for those who already have a basic health plan individual or group and want to enhance their sum insured at an affordable premium amount. It is not compulsory to have a base health insurance plan to buy a top-up plan, but it is always advisable to take a base policy first before opting for top-up plan.
The only difference is between normal mediclaim plan and top up plan is the deductible amount. Policy holder has to opt for deductible amount at the time of buying the fresh plan. Higher the deductible, cheaper the plan. But top-up health plans should be bought to bridge the gap between existing policies and actual costs. 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.
It is advisable to buy top-up plan from the same insurer from which you have bought individual or group health insurance. This saves time and documentation work at the time of claim.
Normally it is better to coordinate with one insurer for reimbursement of claim, than to coordinate with two different insurers. The premium for 30 year old male for Rs. 3 lakh sum assured is around Rs. 3,000 p.a. in base plan. If the same person buys the top up plan of Rs. 10 lakhs with deductible of Rs. 3 lakhs, the premium will be around Rs. 3,000 p.a.
So by paying just double premium you can increase your health insurance cover by four times. It is advisable to buy base plan as individual cover for each member of family and top up plan as family floater as the big claims happen rarely. So the chances of big claim are unlikely to happen to all family members except when all are travelling together and God forbid meet a major accident.
Both your indemnity policy and the top-up plan can be claimed together for single hospitalisation. The first condition to be met is the threshold of the top-up plan. Another criterion is that a top-up plan normally works only on a single incidence of hospitalisation.
This means that you can use the top-up plan only if your medical bills exceed the deducible amount during a single hospitalisation by a single member. 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. So, the deductible has to be crossed for every single illness for policy benefits to commence.
There are few plans which do not have the limit of single claim but can be claimed for any illness over deductible amount for entire year. This plans are known as super top ups.
So top up plans are the need of hour and avoiding it can cost you a lot and can also spoil your financial freedom.
The author is a CFPCM and Head – Financial Planning at ApnaPaisa.