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Should you top up your health cover?

Even though medical costs are skyrocketing, the average ticket size of a health insurance policy is around Rs 2 lakh — enough to fund small hospitalisation costs, but not a serious case such as a heart attack.

business Updated: May 03, 2014 01:16 IST
Deepti Bhaskaran

Even though medical costs are skyrocketing, the average ticket size of a health insurance policy is around Rs 2 lakh — enough to fund small hospitalisation costs, but not a serious case such as a heart attack. Therefore, you need to review your health insurance needs and then cover any shortfall.

As you grow older, health insurance becomes more expensive. So, to enhance the cover while keeping costs in check, individuals should consider a top-up health insurance plan. These are cheaper alternatives to regular policies.

A top-up health insurance plan is a regular indemnity plan that covers hospitalisation costs but only after a threshold limit is crossed. In insurance parlance, this limit is called deductible — the portion of the claim amount that is not covered by the insurer and which the insured has to pay before the benefits of the insurance policy can kick in.

Here’s an example. If you have a top-up plan of Rs 5 lakh with a deductible limit of, say, Rs 2 lakh, it means that the first Rs 2 lakh of the hospitalisation bill will have to be borne by the insured person, and the balance by the insurer.

If you run up a bill of Rs 5 lakh, you can use your individual health insurance policy from insurer A to pay Rs 2 lakh and then use a top-up cover from insurer B to pay the remaining Rs 3 lakh.

The deductible limit makes these plans cheaper. HDFC Ergo General Insurance Co Ltd, for instance, has a top-up cover called Health Suraksha Top Up and a regular indemnity plan called Health Suraksha. For a 35-year-old under the top-up plan, a cover of Rs 5 lakh with a deductible of Rs 2 lakh would cost around Rs 3,000 as annual premium while the regular indemnity product for Rs 5 lakh cover would cost around Rs 7,250.

Top-up policies come as individual and floater plans. A floater plan covers more than one individual in a family.

Choosing a top-up plan
There are two kinds of top-up plans available. Be careful in choosing. The basic top-up plan covers only “single incidence hospitalisation”. In other words, if your hospital bill exceeds the deductible during a single incidence of hospitalisation, only then is the top-up plan activated. For example, if a person’s hospitalisation bill is Rs 5 lakh, a basic top-up plan of Rs 3 lakh deductible will cover the difference of Rs 2 lakh. But if the person gets hospitalised twice in the year, and the first time it costs her Rs 2.5 lakh and the second time Rs 2 lakh, the top-up plan will not get triggered at all. Even as the total bill overshoots the limit of Rs 3 lakh, each instance of hospitalisation is well within the deductible limit.

With a floater plan where two members get hospitalised with bills of Rs 2.5 lakh each, the top-up plan will not get triggered at all. Even though the total amount is more than Rs 3 lakh, individually they are within the deductible limit.

Plans such as those offered by Bajaj Allianz General Insurance, Apollo Munich Health Insurance and Star Health and Allied Insurance come under this category.

The second and a more recent version of a top-up plan looks at the aggregate claim. This means it puts together several cases of hospitalisation to calculate the deductible limit. In the example above, both the cases of hospitalisation in a year would be put together and since the total bill crosses the deductible limit of Rs 3 lakh, the top-up plan would pay Rs 1.5 lakh.

Under the floater option, the deductible limit will be calculated by bunching together the two claims made by two individuals. In the example above for the floater policy, such a top-up plan would pay Rs 2 lakh, after the base policy pays Rs 3 lakh.

Many insurers offer this improved version of top-up health insurance — HDFC ERGO General Insurance, L&T General Insurance, Max Bupa Health Insurance, the new entrant CignaTTK Health Insurance and United India Insurance are some.

Some of these plans, however, may insist on a base cover. For instance, the top-up plans offered by Max Bupa need you to submit details of a regular health insurance plan so that the insurer can top-up that plan. Some plans only look at your medical expenses, paid directly or through an insurance policy, to calculate if the deductible has been exhausted.

When to buy a top-up?
While top-up plans are a cost effective way to increase health cover, often, these may not be cashless. Even though insurers offer the cashless option in these plans, it is difficult to implement. “Top-up plans work largely as reimbursement plans because the insurer needs details of all the medical bills to assess whether the policyholder has paid the deductible limit herself or through a health insurance policy. Cashless is possible provided we get proof, but reimbursements are more prevalent practically,” said Mukesh Kumar of HDFC Ergo.

If your health cover is negligible, you are better off buying a regular health insurance policy. In fact, top-up plans are most cost-effective when the deductible is high. That’s because the premiums actually depend on the cover provided by the base plan. Typically, minor claims are more frequent than big claims, so a top-up plan that comes with a higher deductible is cheaper.