Published Article Details

Top-up vs new health insurance policy: Which one should you choose?

Posted by: Arti Bhargva on Jun 22, 2020, 11.20 AM IST

Deven has been regularly renewing the health insurance policy of Rs 10 lakh for himself and his wife. Given the rising healthcare costs and the ongoing pandemic, he realises that this amount may not be enough. He is thinking of either upgrading his cover to Rs 25 lakh or taking a new Rs 15 lakh ‘top-up’ cover, which his adviser has suggested. Which one should he consider?

Deven’s concerns about the insufficient health cover that his existing policy provides is completely justified. The Covid crisis has been an eye-opener as the average hospitalisation cost could range anywhere between Rs 10-15 lakh. He needs to increase his cover.A top-up health plan is an additional coverage for people who have an existing health policy at a lower cost. Since it provides the necessary additional coverage at low costs, it would mean that a health insurance top-up plan is what would make sense for Deven.

Deven can buy a new regular health policy with Rs 15 lakh cover or he can upgrade his existing plan by Rs 15 lakh. However, both these options work out to be expensive. A top-up plan for the same amount, on the other hand, will cost much lower. The cost of the top-up plan is linked to a factor called deductible limit. It is the limit which is pre decided and mentioned in the schedule and only when the cost of a single illness crosses that limit the top-up plan kicks in. The higher the deductible, the cheaper the top up plan. The primary policy reduces the risk for the insurer

For Deven, he can set the deductible limit as high as Rs 10 lakh since his primary health insurance policy covers him till that amount. A top-up plan generally covers only single incidence hospitalisation. That is, if his hospital bill exceeds the deductible during single hospitalisation, only then can the top-up plan be used. There are few plans which do not have the limit of single claim but can be claimed for any illness over deductible amount for entire year. These plans are known as super top-ups.

Top-up health plans are designed to enhance the existing policies to cover the actual healthcare costs, without duplication of cover, while managing costs reasonably. Top up plans ensure that there is sufficient cover and that insurance does not run out when the actual need arises.

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