At top of your game: Health insurance

Written by Saikat Neogi | Updated: Sep 23 2014, 16:01pm hrs
HealthThe basic difference between a normal health insurance policy and top-up plan is the deductible amount. (Reuters)
In the wake of growing medical costs, a single health cover plan may not be enough to deal with the needs of an entire family, especially in case of a critical ailment. One must, therefore, consider a top-up plan as it gives additional cover over and above the normal coverage, and is helpful if the normal cover is exhausted.

A regular health insurance policy reimburses hospital bills up to the sum insured while a top-up plan covers costs after a certain threshold is reached. When one is hospitalised, the insurer pays up to the sum insured limit and the top-up takes care of the amount over and above it. Top-ups are not riders like hospital cash, critical illness and personal accident covers as they are indemnity policies and provide the same benefits as a regular reimbursement health insurance plan.

The underwriting of top-ups differs as the base policy reduces risk for the insurance company. A top-up plan is available in two distinct versions individual cover and family floater and is eligible for deduction under Section 80D of the Income-Tax Act, where the cap on deduction is R15,000 a year. In top-up policies, most insurers do not ask for medical check-ups up to the age of 55 years and, in reimbursement plans, this is usually 45 years.

Top-up plans are handy for policyholders as they don't result in an increase in the premium of the existing plan. Analysts say whether one has a health insurance cover from the employer or a policy of his own, top-ups can deal with the ever-rising medical costs, especially for critical illnesses. Typically, a top-up health insurance plan works on the basis of a cost-

sharing model, where medical expenses up to a deductible limit are borne by the insured.

Top-up plans available in the market offer a sum insured of anywhere between R1 lakh and R10 lakh. Suppose one has a basic health insurance of R3 lakh and a top-up policy of R10 lakh with deductible of R3 lakh. Then, if the claim amount is R13 lakh, then R3 lakh will be paid by the insurer based on the base plan and another R10 lakh will be paid from the top-up plan.

While one can buy a top-up cover from any insurer, analysts say it is always advisable to take it from the same insurer from which one has taken the base plan. This will save the hassles of documentation and make the coordination process smoother in case of any claim. One must buy the base health insurance individual cover for each member of family and, then, a top-up plan as family floater, says Suresh Kumar, an independent financial adviser. Also, indemnity policy and the top-up plan can be claimed together for a single hospitalisation. There are super top-ups, which do not have the limit of single claim and can be claimed for any illness over the deductible amount for the entire year. A super top-up cover considers the total of all the bills in a year and not just the single instance.

The basic difference between a normal health insurance policy and top-up plan is the deductible amount. Deductible is the portion of the total claim amount that is not covered by the insurance company and has to be paid by the policyholder or the insured. A policyholder has to opt for the deductible amount at the time of buying the fresh plan. Higher deductible amount makes the top-up plan cheaper. A top-up cover is also beneficial for the salaried who have a group cover from their employer as they can extend it beyond a point.

Top-up plans are cheaper than regular health insurance plans as they cover only beyond a threshold, the probability of which happening is very remote. Like a normal health cover policy, even a top-up cover imposes restrictions on pre-existing illnesses. Some top-up covers do not cover pre-and-post hospitalisation expenses. General insurance companies offer indemnity policies or reimbursement health plans while life insurers offers plans that are defined benefits, paying a lump sum on the diagnosis of any critical illness. So, the next time you renew your health insurance policy, do evaluate top-ups for additional cushion and a much-needed financial security for your family.