There are no two thoughts that in India there is a general lack of awareness on insurance. In fact, the big driver for the masses to take insurance is for the benefit of tax deduction or that the same is being seen as a savings instrument. Not surprisingly thus, most of population is under insured, meaning a majority of Indians do not have adequate risk cover that can protect them and family in case of any undesired event.
Take health insurance for instance. A recent report 'Aarogya Bharat 2015', released by NATHEALTH, alarmingly highlighted that nearly 70% of Indians do not have any health insurance and the country was short by nearly 2 million beds compared to the global benchmarks. Among the reasons for not taking adequate insurance, apart from ignorance and availability, is the cost factor. Indeed, with the entry of private insurers, the products are getting improved, customised, optimised and cheaper. In this article, we will discuss two product innovations in health insurance - Top-ups and Super Top ups that are now gaining popularity.
Why 'Right' Health Insurance?
No one plans or expects to get sick or hurt but often most of are likely to need medical care at some point in life. Health insurance is your protection against unforeseen health related issues and it offers many important benefits that cannot be ignored. Given our fast paced, hectic professional lives, we often neglect our most important asset - our health and in effect our lives. With increasing levels of stress, negligible physical activity, deteriorating environment and bad life-style, our vulnerability to diseases has increased at an alarming rate. Health Plans offer the financial security to meet health related contingencies so that it does not affect your financial independence and other goals in life. Taking health insurance when you are healthy and young is strongly recommended as the benefits of lower costs, ease of buying & choice of products are very prominent.
Most of us who have health coverage, are either covered under individual mediclaim of Rs. 50,000 or Family Floater of Rs.1 or 2 Lacs only. Some of us rely on the corporate group plan sponsored by employer. With rising inflation and medical costs, the average bill for hospitalisation is rising by anywhere 10-20% every year depending upon the treatment. A recent survey shows that claim size has increased for most diseases with 18% claims received for critical illness in 2013 exceeded Rs.2 lacs. Other diseases with high average claim size included heart valve replacement ~Rs.3.5 lacs, stroke ~Rs.1.7 lacs, myocardial infarction ~Rs. 2.5 lacs and major organ failure ~Rs.1.1 lacs. Clearly, nominal amounts of Mediclaim policy or family floater seems grossly inadequate. The need of the day, therefore, is to assess and have the 'right' health insurance cover that may cover most of the common treatments & ailments going forward.
Increasing Your Health Insurance Cover
In India, there are two types of top-up plans – the regular Top-up Plan and the Super Top-up Plan. Both, “Top up” and “Super top up” are plans introduced to give additional health insurance cover over and above your existing health plan. The good news is that you can choose your Top Up /Super Top Up plan from any insurer and it is not needed that it is from the same insurer as your existing base policy. One question may arise here – why should I buy another policy? The answer is simple, with top up plans, you save more money compared to buying an additional regular health policy. With the same amount of money, you may also get much higher sum assured.
Top-Up Plans: How does it work?
A top-up plan, whether a regular Top-Up or Super Top-Up, pays only after the threshold limit is crossed for a single claim /hospitalisation. This threshold limit is called deductible. A deductible is that portion of the claim amount that is not covered by the insurer and has to be paid by the insured person / or a base health policy before the top-up policy comes into effect. The top-up policy will not come into effect if the claim amount is within the deductible range.
We can see this with the help of an example where a top-up policy is taken with deductible Rs.2 lacs and risk cover of Rs.5 lacs.
As depicted, in a regular health insurance plan, expenses are reimbursed for up to the sum insured on the policy. The top-up plan would only cover expenses over and above the threshold limit to the extent of the coverage taken.
| Claim Coverage Different Scenarios |
Case A Claim Rs. 1.5 L |
Case B Claim Rs.3 L |
Case C Claim Rs.10 L |
| Top Up Health Cover Covers between Rs.2-5 Lac Only |
NA | Pays Rs.1 L | Pays Rs.5 L |
| Regular Health Ins. Policy Cover only upto Rs.2 Lac (Thresh-hold/Deductible) |
Pays Rs.1.5 L | Pays Rs.2 L | Pays Rs.2.0 L |
What is a Super Top-up cover?
The Super-Top is like an advanced, more beneficial version of the top-up cover. In a regular top-up cover, the amount over threshold will be paid only if the claim amount is above the threshold for a single claim. The regular Top Up will not trigger even if there are multiple claims where total amount exceeds deductible limit but not a single policy is above the deductible. In our case above, say there are 3 cases in a year of Rs.1.5 each, the total claim would be thus Rs.4.5 Lacs. However, since no claim is above Rs.2 Lacs, a regular Top Up plan will not pay any amount as it is yet to be triggered. The base policy, in this case case will only pay upto Rs.2 Lac and Rs.2.5 Lac would have to be paid by the policy holder.
Had this been a Super Top Up Plan, the policy would have paid the additional Rs.2.5 L since the total was Rs.4.5 Lac. The policy holder thus would not be required to pay any amount from own pocket. This is because a Super Top-up plan pays after a threshold limit is crossed for all the claims in a year in TOTAL.
Features of Top Up plans:
Many insurers are today offering various features in Top Up and Super Top Up plans. One Super Top Up plan offered by an insurance company converts into full fledged regular health plan upon retirement. Some insurance companies also give option of Top Up / Super Top Up within their regular health plans. Both Top Up plans have become popular because it gives high risk cover at low premiums and saves a lot of hard earned money. Apart from the cost advantage, the following are the common features of the Top Up plans...
- Can buy it from any insurer
- Available with individual and family floater options
- Premium paid is eligible for tax deduction under section 80D
- Presence of general conditions like waiting period for pre-existing ailments and exclusions
Example: Cost Estimates for a family of 2 Adults + 2 Children with eldest member age 35. Regular Health Plan of Rs 2 Lacs would cost the family – Rs 9,000/-. A Super Top Up with Rs.2 lac deductible and Rs.8 Lac risk cover will cost around Rs 4,300/-. Total Combo for Rs 13,300/-. Whereas Regular Health Plan of Rs 10 Lacs would cost around Rs.20,000/-. Therefore, the savings is of more than Rs 6,500/-. The premium rates usually work out to be at least 30% to 40% cheaper than taking an individual health plan for a higher coverage.
Final word...
Though a relatively new concept, Top Up plans like regular Top Up and Super Top Up plans are already in demand in the market. They work out as a good option for those who wish to go in for a higher cover at minimal costs. However do keep in mind the threshold limit, as some of these policies do not bear fruit till this level gets activated. So is a Top Up or Super Top Up cover the best option to upgrade your health insurance coverage? The answer is still subjective.
There is no perfect size that fits all. Buying insurance has to be as per you own need assessment. A regular health insurance policy of full amount can still give you better convenience in terms of purchase and claim handling and they can be preferred if the policy cost, terms and conditions are acceptable. If not, next step would be to better compare the features and costs of different Top Ups, Super Top Up and Mediclaim policy available and then make the right choice. Buying insurance should be taken as a serious exercise and guidance /expert's advice is highly recommended. The need of the hour would be that you start with finding the 'right' cover needed for you and your family and then search 'right' policies that would ensure peace of mind for you, even if it comes at some cost.