Is purchasing a top-up health insurance policy a reliable option for paying all your future health bills?

Health Insurance

A top-up health insurance plan is designed to provide coverage beyond a certain limit, known as the deductible. It comes into effect only after your hospital bill exceeds this threshold. Typically, this deductible is expected to be covered either by your existing base health insurance policy or paid out of your own pocket. Many people opt for top-up plans to enhance their health coverage without paying the high premiums associated with a larger base policy.

Why top-up plans are appealing

Top-up plans are desired because they provide greater coverage at relatively affordable premiums. They are especially convenient when you require protection for large hospital expenses due to serious illness or long-term treatments. For young and health persons who never use their insurance, top-ups are an economical means of covering against severe health occurrences without paying too much for routine coverage that they will never frequently utilize.

Limitations of using only top-ups

While advantageous, top-up plans are not ideal as individual solutions for every healthcare cost. They exclude medical costs until the deductible is exhausted, such that lower claims or incidental medical costs are beyond their coverage. If you don't have a solid base policy, or if your base coverage expires, you'd have to pay the deductible out of your own pocket before the top-up kicks in to cover. That might be expensive if you have a number of little medical problems that don't each exceed the deductible.

Additionally, top-up policies also do not cover outpatient costs like doctor consultations, diagnostic tests, or ongoing medication except when these are accompanied by a hospital stay. This renders them inadequate for people with chronic illnesses or multiple medical requirements.

When top-ups are appropriate

Top-up health insurance becomes a reliable component of your financial strategy when combined with a strong underlying policy. For example, if your base policy covers ₹5 lakh, taking an add-on with a ₹5 lakh deductible and ₹20 lakh sum insured can give great protection for high or unforeseen hospital bills. But it must be considered an add-on, not a substitute. For total health coverage, you might even have to include outpatient expenses and chronic care requirements separately, either under the rider benefits or other forms of insurance.

Purchasing a top-up health insurance policy is a good means to add depth to your financial cushion, given the ongoing increase in healthcare expenses. However, it is not a be-all solution for all health costs. Its utility is in complementing your coverage during major medical incidents, rather than addressing routine health problems. To provide reliable and all-round protection, a top-up plan must always be complemented by a solid foundation policy and careful planning for non-hospitalisation costs.