Deepak Yohannan myinsuranceclub.com
Rising healthcare costs mean that your once abundant cover of Rs. 5 lakhs will not go far. Even a single trip to the hospital could wipe out the entire coverage amount. You may want to increase the coverage amount, but that would result in a considerable hike in the premiums. Is there a way to increase the health cover without breaking the bank?
Yes, there is. Top up plans present one way to increase your and your family’s health coverage without incurring a significant hike in premiums.
What is a Top Up Plan?A top up plan is a health insurance plan that offers you additional coverage beyond the coverage limits of your existing health plans. Such a plan is essentially used to enhance existing health coverage. You can buy a top up plan whether you have health insurance from your workplace or an independent policy. You can even buy a top up plan if you have no existing health insurance plan—however, this is not recommended, as we will discuss later in this article.
How does it work?Let us say that Ritika has a family health plan offering coverage up to Rs. 3 lakh. She worries that this will not be enough. However, she cannot afford the premiums required to extend the coverage. So she opts for a top up policy of Rs. 5 lakh with a threshold of Rs. 3 lakh.
Soon after, Ritika runs up a hospital bill of Rs. 9 lakh. Her family plan pays the first Rs. 3 lakh, which leaves her with a bill of Rs. 6 lakh. Now that the Rs. 3 lakh threshold has been crossed, the top up plan comes into effect and pays an additional Rs. 5 lakh. This leaves Rs. 1 lakh that Ritika has to pay out of her own pocket.
The problem arises when Ritika runs up separate bills of Rs. 2 lakh and Rs. 2.5 lakh. Since neither bill crosses the threshold of Rs. 3 lakh, the top up policy does not come into play. Her base plan reimburses claims to the tune of Rs. 3 lakh, leaving Ritika to pick up the additional Rs. 1.5 lakh tab.
Advantages and disadvantages of Top Up Plans:The most obvious advantage of a top up plan is that the premiums are cheaper- a result of the high deductibles associated with such plans. It is an affordable way to extend health coverage, but it also comes with clauses and restrictions. First, as explained above, a top up plan will come into play only when a hospital bill exceeds the threshold limit. Second, top up policies apply only for a single instance of illness per year. If the insured is back in hospital within 45 days of his discharge, it will qualify as a single illness and the top up will apply. If more than 45 days have lapsed, the hospitalizations will be deemed as separate illnesses, and the top up will not apply.
The Importance of a Good Base PlanThis highlights the need for a good base plan to cover you against multiple instances of hospitalization of lower than threshold limits in the same year. A top up plan becomes truly effective only when you have a good base plan in place.
The author is the CEO of MyInsuranceClub.com, an online insurance price & features comparison portal.
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