How does Top up cover work in Health Insurance?
A top up plan is like a regular health insurance plan where the hospitalization and other allied expenses are covered but only after a threshold limit, known as deductible. Every top up policy comes with a certain deductible and deductible is the amount of claim that is to be borne by the policyholder. A top up policy is normally taken in addition to the base policy where the requirement of sum insured is high but the severity or occurrence of claims is rare. The premium charged for the top up policies is quite less compared to that of the base health insurance policies. This is due to the high deductible in the top up policies when compared to the normal health insurance policies.
Top up cover working model:
The top up plans offered by the insurers are cheap due to the reason that insurance companies don’t offer the top up plans without having a base health insurance plan. The higher deductible ensures that the insurance companies have little liability and the chance of occurrence of huge claims is generally low.
For example, Mr. Daniel aged 30 years has taken a base health insurance policy for a sum insured of Rs.5 Lacs and purchased a top up plan for Rs. 15Lacs with a deductible of Rs.5 Lacs. In total his coverage is Rs.20 Lacs including the base policy and the top up policy. Now let us understand how the reimbursement claims work in this scenario:
- If there is a single claim of Rs.3 Lacs in a year, then the base policy will pay the claim amount of Rs.3 Lacs and the top up cover remains intact.
- If there is a single claim of Rs.20 Lacs in a year, then the base policy will pay the claim amount of Rs.5 Lacs and the remaining Rs.10 Lacs will paid from the top up policy (as the deductible in the top up policy is Rs.5Lacs, the top up policy will trigger only if the claim amount is above the deductible amount).
- If there are multiple claims in a year of Rs. 3Lacs, Rs. 5 Lacs and Rs.15 Lacs. In case of first claim the base policy will settle the amount , in case of second claim base policy will settle Rs. 2Lacs (remaining S.I after settling first claim) and the remaining claim amount of Rs.3Lacs has to be borne by the insured. In the third claim (total base sum insured exhausted) the top up policy pays only Rs.10 Lacs (deductible is Rs.5 Lacs) and the remaining claim amount has to be borne by the policyholder.
A top up policy is ideal to those people who have a regular health insurance policy but do not have sufficient coverage to deal with a huge medical emergency. It can be understood that the top up policy is beneficial for claims arising out of a single illness in a single event. For instance in the above example of base policy and top up sum insured the total premium would come around Rs.10k but if the total sum insured of Rs.20 Lacs is to be taken under the regular health insurance it would cost the policyholder around Rs.30k.
You can opt for a higher sum insured health insurance plan, but that will increase your premium. Or else you can opt for regular health insurance plan with adequate sum insured and purchase a top up plan with deductible amount less than or same that of regular health insurance.
The top up plans sum insured are in general reimbursed when all the medical bills are submitted to the insurance company within the specified time frame. The deductible amount under the top up policy has to be paid by the policyholder to the hospital before the insurance company settles the remaining claim amount.
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