Knowledge Centre

Why should you expand your mediclaim with a top-up policy?

You have a clear idea that your corporate health insurance is not sufficient to beat the medical inflation. You want to buy an individual health insurance but find it too expensive. Or you already have a health insurance policy and want to expand the coverage, but the costing is deterring you from doing it. Should you continue with the lower employer health insurance coverage or there is a way out?

The same question came into the mind of my friend Rajiv when one afternoon he came to my office to clear his doubts on mediclaim policies. Looking sad and disturbed, he narrated his story: “Look me, my wife and son are covered under a family health insurance policy for Rs 3 lakhs, but I don’t think it is adequate.”

The reason behind this worry was his recent trip to the hospital where his cousin was admitted for 15 days after a car accident at Noida DND. By the time he got discharged, his total hospital bill had already crossed Rs 15 lakhs mark. Though his cousin had a health insurance, it was not sufficient to bear the medical expenses. He dug into his savings to finance his medical expenses.

The condition of his cousin disturbed Rajiv and made him realised that his health insurance policy is also not sufficient.

As Rajiv was already paying a total Rs 25,000 on all its insurance policies, it was not possible for him to buy one more mediclaim policy. He desperatelyasked, “Is there any way out?”

Yes, there is a solution in the form of top-up policies.

What is a top-up plan and how it works?

Top-up is like an extension of your mediclaim policy which comes into the picture only when the single claim crosses the threshold limit. The plan comes with a deductible, which means that the policy will settle claims only when they cross the threshold limit.

For instance, you have a health insurance plan of Rs 5 lakhs and a top-up policy of Rs 15 lakhs with a deductible of Rs 5 lakhs. Ifyou run up a medical bill of Rs 10 lakhs; you can use your individual health insurance policy to pay Rs 5 lakhs and then your top-up policy to pay the remaining Rs5 lakhs.

Here is how top-up health cover works:


Top-up health cover

Your health insurance policies

Policy 1: A regular health insurance policy with Rs 5 lakhs coverage.

Policy 2: A top-up cover of Rs 15 lakhs with a threshold limit of Rs 5 lakhs.

Situation A

One claim of Rs 8 lakhs in a year

Policy 1 will pay Rs 5 lakhs

Policy 2 will pay Rs 3 lakhs as the claim has crossed the threshold limit

Situation B

Two separate claims of Rs 2 lakhs and Rs 4 lakhs in a year

Policy 1 will pay Rs 2 lakhs for the first claim

Policy 1 will pay Rs 3 lakhs (5-2) for the second claim

Policy 2 will not pay anything because the billing amount (i.e. Rs 4 lakhs) has not crossed the threshold limit, which is Rs 5 lakhs

Situation C

Two separate claims of Rs 8 lakhs and Rs 4 lakhs in a year

Policy 1 will pay Rs 5 lakhs

Policy 2 will pay Rs 3 lakhs as the bill has crossed the threshold limit

Policy 1 and Policy 2 will not pay anything in case of the second claim. While Policy 1 has already exhausted the cover, the second claim amount has not crossed the threshold limit

While buying top-up plans, consider the following points:

  • You don’t need to buy a mediclaim policy to purchase top-up plans

  • Threshold limit is applicable for each plan tenure

If you have a car, you clearly understand the risk of driving it without stepney, similarly, in today’s world, where medical costs have reached to a great height, living without mediclaim policy and top-up plan can prove costly to your finances.

Benefits of top-up policy

  • As these policies come with a deductible limit, insurers can protect themselves from minor hospitalisation expenses which are frequent. This benefit is passed on to policyholders in the form of cheaper premium rates

  • As the medical costs have increased at a great rate, it is useful to buy top-up plans which can help in dealing with medical expenses

  • It is available with both individual and family floater health insurance policies

  • You can buy the policy, even if you don’t have any health insurance policy

  • You can purchase the policy from any insurer as there is no compulsion to get the policy from the same insurer you have purchased your mediclaim policy

  • Some insurers allow the conversion of top-up policy into an individual health insurance plan

  • These policies enjoy tax benefits under Section 80D of the Income Tax Act

By paying just a double premium amount, you can expand your health insurance cover by four times. It is advised to buy individual mediclaim policies for each family member and top-up as a family floater.

It is important to check the top-up coverage before buying the policy because you don’t want to end up buying a plan that won’t cover medical expenses which might arise in the future.

The final verdict

The increasing inflation rate could send medical costs upwards. From hospitalisation, medicines to various diagnostic tests, the costs seem to be escalating with every passing year. Given the spiralinghealthcare costs, top-up plans are the necessity of today’s time and avoiding them can cost you a lot.

If you are already covered under another mediclaim policy or have a corporate health insurance and feel it is insufficient, the top-up policy is a good option. However, do keep in mind the threshold limit as these policies do not give results till this level is crossed.

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