On average, normally the health cover people take is Rs 1-3 lakh. For minor hospitalisation or surgery, this amount may be sufficient but what if there's something serious? As health costs soar, you need to review your health insurance needs and cover any shortfall.
When increasing
cover, consider top-up health insurance plans.

Top-up plans

A top-up health insurance plan, also known as add-on plan, is a regular indemnity plan that covers hospitalisation costs but only after a threshold limit. In insurance parlance, this limit is called deductible.

Top-up plans start with a basic deductible of R1 lakh; the deductible can go up to R5 lakh. A deductible of R1 lakh means the first R1 lakh of the hospitalisation bill will have to be borne by the insured himself; the balance will be paid by the insurer. Owing to the deductible, these plans are cheap.

Sample Bajaj Allianz General Insurance Co Ltd's Extra Care, a top-up health insurance policy. For a sum insured of R10 lakh and a deductible of R3 lakh, the policy charges R2,500 from a 30-year-old. But for Health Guard, their regular indemnity policy, the premium is R10,913 for a sum assured of R10 lakh.

"With year-on-year healthcare inflation at 16-20%, a top-up policy is a low-cost investment, which will pay dividends in the long run," said Mahavir Chopra, head (e-business and retail), Medimanage.com, a health insurance portal.

Top-up policies come as individual & floater plans

Limitations: Some top-up plans may not cover pre- and post-hospitalisation expenses. For instance, ICICI Lombard General Insurance Co. Ltd's Healthcare Plus and Star's Super Surplus do not cover pre-and post-hospitalisation expenses. However, Sanjay Datta, head-underwriting and claims, ICICI Lombard General Insurance, said there is a reason why. "Pre-and post-hospitalisation expenses are roughly about 10-15% of the total expenses. This the base policy can cover. The idea behind a top-up cover is to buy extra."

Also, top-up plans cover only "single incidence hospitalisation". If your hospital bill exceeds the deductible during a single incident of hospitalisation, only then does the top-up plan gets triggered.

When do they make sense?

Top-up plans make a lot of sense if you have a comfortable base. "Top-ups are being mis-sold as an immediate extension cover of an existing cover," said Chopra. "But the most important factor that people are unaware of is that the threshold or deductible triggers only when the cost of single hospitalisation goes above the threshold. Hence, in our opinion, one should have a comfortable core cover for the family and a top-up to extend the cover."

In fact, top covers are cost effective the most when the deductible is high. You can afford a higher deductible when your basic cover is decent. "The premiums actually depend on how close you are to the ground," said Datta. "Typically, minor claims that are between R2 lakh and R3 lakh are more frequent than huge claims that are above R4 lakh. So a top-up plan that comes with a higher deductible is cheaper than a top-up plan with a lower deductible."

Other policies

Floater policies: A good time to consider a floater policy is when your family expands. Since a floater policy considers the entire family as one unit, the premiums are lower. But the biggest advantage of a floater policy is also its biggest drawback-in the rare case when the entire family needs medical care, a small floater cover can pinch very hard.

Defined benefit plans: The market does not stop at indemnity policies alone. Health insurance plans that have a defined benefit are equally popular. Since the benefits under these plans are defined, they usually work well as income supplement products.

But if you have enough savings or sufficient health insurance, you could give other defined benefit plans, including hospital cash that pays daily cash during hospitalisation or major surgical benefit that pays a lump sum on major surgical procedures a miss. To make top-up plans work in your favour, ensure you have a comfortable base.