Health insurance covers your needs during a health emergency. But if the hospital bills exceed your health insurance cover amount, then you have to pay the extra amount from your pocket. However, there is a way to avoid this situation with top-up plans.
But what are top-up plans in health insurance policies? How do they work? And what are their advantages and disadvantages? In this blog, we will talk about everything related to top-up plans.
First, let’s understand what are top-up plans.
If you have a health insurance policy and if you feel that the cover is not enough as per your current needs, you can buy a top-up plan to increase your coverage amount. In the case of hospitalization, if your claim amount is more than the cover amount of your base health plan, you can claim the extra amount from the top-up plan.
There are two kinds of plans, (i) top-up plans and (i) super top-up plans.
(i) Top-up plan: A top-up policy is applicable on a per claim basis and kicks in only if the claim amount is more than the cover of your health insurance plan. For example, if you have a top-up plan, then in case of hospitalization if the bill amount exceeds the cover of your health insurance plan, then you can claim the differential amount from the top-up plan for that particular claim.
(ii) Super top-up plan: Super top-up pays the amount if due to repeated claims you have exhausted the yearly cover provided by your base health insurance. It works at an aggregate level and kicks in as in when you have used your base policy amount. So, unlike a top-up plan, there is no threshold at a particular claim level.
Let’s understand the plans with an example:
Policyholders A and B are hospitalized and have a top-up and super top-up policy respectively of Rs 5 lakh over a basic health policy of Rs 3 lakh. Say the claims that happen to both for a particular year are Rs 3 lakh, Rs 1 lakh, and Rs 4 lakh.
| Claim | Policyholder A (Health insurance of ₹3 lakh + ₹5 lakh top-up plan) | Policyholder B (Health insurance of ₹3 lakh + ₹5 lakh super top-up plan) |
| Claim 1 – ₹3 lakh | Covered by the base health plan | Covered by the base health plan |
| Claim 2 – ₹1 lakh | The entire amount needs to be paid by the policyholder A. Top-up plan will not cover it as this claim does not exceed the cover amount of the health insurance plan. A top-up plan is applicable on a per claim basis and kicks in only if the claim amount is more than the cover of your health insurance plan). Meanwhile, he already exhausted his health insurance coverage in the previous claim. | It will be covered by the super top-up plan. Super top-up pays the extra amount when the aggregate amount exceeds the cover amount of the basic health plan in case of multiple claims. |
| Claim 3: ₹4 lakh | ₹1 lakh will be covered by the top-up plan, which is the extra amount over his base health insurance coverage amount. Rest, i.e. ₹3 lakh has to be paid by the policyholder A since he has already exhausted his cover in the previous claim. | ₹4 lakh is paid by the super top-up. |
Now, top-up and super top-up plans are often confused with riders, but they are not riders.
What is the difference between a rider and a top-up plan?
You have to buy a rider along with your health insurance policy and by adding them you can avail extra benefits with your basic insurance policy. Like in the case of health insurance, you can add riders, like room rent waiver, maternity benefit, critical illness cover, accidental benefit cover, etc.
Meanwhile, you have to buy top-up or super top-up plans separately. And, it is used to increase your coverage amount over and above your basic health insurance policy.
Now, the relevant question to ask here is, instead of buying a top-up plan separately, why can’t we increase the cover amount for the existing health insurance policy? For that, let’s look at the advantage and disadvantages of buying a top-up or a super top-up plan over increasing the coverage of an existing health insurance plan.
The 2 advantages of top-up policies over increasing the coverage amount for the existing health insurance policy
Number 1: Top-up plans are more cost-effective
Buying a top-up plan is much more cost-effective than increasing the base cover of the existing health insurance plan. And that is the primary reason for some people preferring to buy it instead of increasing the base cover for the existing health insurance plan.
Say, you have a health insurance policy of Rs 3 lakh for which you are paying a premium amount of Rs 6,000 every year. But, you feel that the coverage amount is not enough and you should have at least Rs 5 lakh as the coverage amount. Now, if you decide to increase the coverage of your existing plan from Rs 3 lakh to Rs 5 lakh, the premium amount for the policy would be Rs 10,000 annually.
Meanwhile, in case you already have a health insurance policy, then the premium amount for top-up plans is usually Rs 1,000 per lakh cover. Hence, for an extra Rs 2 lakh cover, you will have to pay an additional premium of Rs 2,000. The total premium for the policy and the top-up plan combined would be Rs 8,000 per year.
Number 2: Coverage amount for an existing policy can be increased up to a limit
If you want to increase the sum assured for your health insurance policy, you can only increase that to some extent. Each health insurance company determines up to what limit it will allow its policyholders to increase their coverage amount.
But, if you buy top-up or a super top-up plan, you can decide what cover amount you want to buy.
Now, let’s look at the disadvantages it has against increasing the cover amount for existing policies
Here are the 2 disadvantages of top-up plans against increasing the cover amount for existing policy
Number 1: Top-up plans have a waiting period
Since top-up plans are bought as a separate plan so they have a waiting period during which you can’t make any claims.
For example, like a health insurance policy, top-up plans have an initial waiting period of one month, during which you cannot make any claim. Then some top-up plans come with a one-year waiting period for specific diseases like tonsils, hernia, cataract, etc, during which you cannot make any claim for those specific illnesses mentioned in the policy. Also, if you have any pre-existing ailment, there is a waiting period of two to three years.
Number 2: You can’t avail the ‘no-claim benefit’ for a top-up plan
For every claim-free year, your health insurance company rewards you by increasing your coverage amount or decreasing your yearly premium amount. This benefit is called a no-claim bonus.
But, the top-up plans do not come with the no-claim bonus benefit. If you want to increase your cover amount for top-up plans, then you will have to buy more cover.
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