Top Up Policy in Health Insurance
Top Up policy is the cheapest way to supplement your health cover. The increasing medical and hospitalization costs may make your health cover negligible in the future. But it is not feasible or manageable to buy multiple health insurance policies due to high costs and difficulty in managing claims of multiple policies.
The best way to increase your health cover in an economical and manageable way is to buy a Top up health policy. These plans are affordable and cheaper as compared to a basic health insurance plan.
Also Read: 5 Health Insurance Riders you should know
This policy provides health cover over and above a threshold limit known as ‘deductible limit’. The health cover starts ONLY when the hospitalization expenses exceed the deductible limit. The cost up to the deductible limit can be either paid by your basic health cover or on your own. Essentially, this policy functions just like your regular health insurance policy but with a deductible.
Hence, the top up policy is also referred to as ‘Stepney’ health cover. Because of the deductible, the premiums of the top up policies are low for a high Sum Insured. It is available as both individual and family floater.
How does the Top Up policy work?
In Top Up insurance, the deductible limit is applicable for each and every case of hospitalization in a year. The claims are admissible only if the cost of every instance of hospitalization in a year, exceeds the deductible limit.
Consider Mr. Nikhil who has an existing base health cover of Rs.5 lakhs and a Top Up policy of Rs.10 lakhs with an Rs.5 lakhs deductible limit.
|Sl. No.||Scenarios||How Top Up Plan works|
|1.||Nikhil is hospitalized once and the total bill is Rs.8 lakhs||The base policy will pay Rs.4 lakhs and the Top Up plan will pay Rs.4 lakhs|
|2.||Nikhil gets hospitalized twice a year. The total hospitalization costs for the first and second instances are Rs.4 lakhs and Rs.3 lakhs respectively.||In the first instance of hospitalization, the base policy will pay Rs.4 lakhs. For the second hospitalization, neither the base policy nor the Top Up cover will pay anything as the base policy is exhausted during the first instance and the hospitalization cost of Rs.3 lakhs does not exceed the deductible limit of the Top Up plan in the second instance.|
|3||Nikhil gets hospitalized twice a year. The total hospitalization costs for the first and second instances are Rs.5 lakhs and Rs.7 lakhs respectively.||For the first instance, the base health cover pays Rs.4 lakhs, and the Top Up policy pays Rs.1 lakh. In the second instance, the primary cover does not pay anything as it is exhausted. The Top Up plan pays only Rs.3 lakhs which is above the deductible limit.|
Before you buy a Top Up plan, you should check the single illness criteria. Many Top Up plans have different clauses for reimbursement of repeated hospitalizations in a year, for a single illness. You should also check the waiting period of pre-existing diseases, coverage for pre-and post-hospitalization expenses, and any other exclusions.
Read About: Common Exclusions in Health Insurance
Important Points about Top Up Policy
- Having a base health cover is not mandatory to buy this policy.
- You can buy your base health cover and top up policy from different insurers.
- You can utilize both base health insurance and a top up policy for a single instance of hospitalization, provided the cost exceeds the deductible limit specified.
- Top up policies are not the same as health insurance riders.
- The premiums paid for top up policies are eligible for tax deduction under Sec 80D of the Income Tax Act.