Top-Up plans for Health Insurance: Why you should add them to your policy
Health Insurance Plans are a necessity to ensure a burden-free financial future. Health insurance policies have become more crucial than ever, owing to the uncertain nature of life and the health concerns arising out of the current pandemic. Although health insurance policies give the policyholder the option to choose any amount as the sum assured, it is at times that the sum assured can fall short during a health emergency. In an event such as this, the policyholders have to pay the extra amount from their own pockets.
However, a policyholder can plan to ensure that the sum assured is enough and directly relates to the current situation. Top-up plans for health insurance can increase the policy’s coverage and help a policyholder claim an extra amount over and above the sum assured of the primary health insurance plan.
Types of Top-up plans.
Top-up plans for health insurance can be of two types:
Regular Top Up plan:Regular top-up plans are a unique way to increase the already existing health insurance policy’s coverage amount. Regular top-up plans kick in only after the claimed amount is more than the sum assured of the basic health insurance policy.
How do Regular Top Up plans work?
Regular Top Up plans work on ‘Per Hospitalization’ basis. The insurance company pays you if your single hospitalization claim amount is over the threshold limit. For example, if you have a basic health insurance policy of Rs 3 lakh, with a regular top-up plan of Rs 10 lakh (threshold limit 3 lakh), then:
- For a single claim of, let’s suppose, Rs 5 lakh, the top-up plan will pay the remaining 2 lakh after paying 3 lakh from the sum assured of the basic policy.
- For multiple claims of, let’s say, Rs 4 lakh and 2.5 lakh, the health insurance policy, for the first claim, will pay 3 lakh, and the top-up plan will pay the remaining 1 lakh. The policyholder will not collect any amount for the second claim as the claim amount (2.5 lakh) is lower than the threshold limit (3 lakh).
Super Top Up Plans:These plans are an extension of the regular top-up plans but are useful in the event of multiple claims. They consider ‘Total of all bills’ in a single year and pay for multiple hospitalization claims.
How do Super Top-up Plans Work?
Super Top Up plans work on the ‘Aggregate amount’ basis and pay the policyholder for every claim made throughout the year. For example, if you have a basic health insurance policy of Rs 3 lakh, with a regular top-up plan of Rs 10 lakh (threshold limit 3 lakh), then:
- For a single claim of, let’s assume, Rs 5 lakh, the super top-up plan will pay the remaining 2 lakh after paying 3 lakh from the sum assured of the basic health insurance policy.
- For multiple claims of, let’s say, Rs 4 lakh and 2.5 lakh, the policy for the first claim will pay 3 lakh, and the super top-up plan will pay the remaining 1 lakh. Regarding the second claim, the policyholder is liable to collect 2.5 lakhs, although the claim amount is lower than the threshold limit.
Top-up plans are a great way to ensure that the health insurance policy is enough to cover your expenses in every medical situation. They are cost-effective because you can increase the insurance policy’s coverage by a sustainable margin by paying a little extra. From a financial and investment standpoint, they are tax effective as they provide tax benefits under section 80D of the Income Tax Act, 1961. However, before adding a top-up plan to your existing health insurance policy, it is advisable to consult an insurance broker to buy ideal top-up plans. PINC Insurance is an expert insurance broker that has designed suitable top-up plans for policyholders to add to their existing health insurance policy.