What Are Top-Up Health Insurance Policies?

Vivek Law: A question by Abhijeet Karmaakar. What are top-up health insurance policies? What is the difference between super top-up and top-up policies? 

Dhruv Sarin: Suppose you decide to cover your medical expenses from your own pocket in the range of Rs 0-3 lacs. In case your medical expenses cross Rs 3 lacs, you will need a health insurance cover. So, Rs 0-3 lacs can be called as a deductible. That’s the fundamental definition of a deductible. A deductible is a particular amount from your medical expenses which you will cover from your own pocket. Above this deductible amount, a super top-up or a top-up covers your medical expenses. 

The broad difference between top-up and a super top-up is that a top-up works on a catastrophic basis. Let’s say you have taken a deductible limit of Rs 3 lacs. For a top-up to trigger, a single bill amount has to be above Rs 3 lacs. For a super top-up to trigger, the total bill amount has to exceed the deductible limit. A top-up policy works on the principle of 'per claim' or 'per hospitalization' whereas in a super top-up policy, multiple claims are permitted. 

One should opt for a super top-up because it works on an aggregate basis rather than a top-up plan.

((calculator)) 

Vivek Law: Is super top-up cashless?

Dhruv Sarin: Every insurer has tie-up with hospitals to whom it offers cashless facilities. Suppose, there are ten hospitals in your area and if your insurer has a tie-up with five hospitals, it doesn’t mean that you can’t visit the rest five of these hospitals. However, you won’t get a cashless facility in those hospitals. You will have to file a reimbursement to cover your medical expenses. A cashless facility is associated with tie-ups of hospitals with an insurer. 

Vivek Law: Abhijeet has another question. He says that his parents are 70-years-old. Should he buy health insurance for them or is it better to save some cash?

Dhruv Sarin: Health insurance is always important. He should consider it. It will depend on his parents' existing medical conditions. I was having a discussion with someone who told me that he doesn’t invest in insurance because he is building a financial corpus by investing in mutual funds. However, this approach is wrong. I told him that I am investing a premium of Rs 75,000 per year for my parents for a Rs 25 lacs health insurance cover. The reason that I pay so much is that I am considering the risk of not just one claim but multiple claims. What if there are recurrent claims in the future? Hence, health insurance is important.