The most common mistake when buying a health insurance policy is settling for a small cover, which may be enough to fund small hospitalisation costs, but not a serious case. So, it's important you buy adequate insurance. But doing that can also mean paying a higher premium, which may not be affordable for some. For such individuals, a health cover top-up plan is a good way to increase the cover while keeping costs in check.

What is it?

This is a regular indemnity plan that covers hospitalisation costs but only after a threshold limit, known as deductible, is crossed. A deductible is that portion of the claim amount that is not covered by the insurer and has to be paid by the insured before benefits of the policy can kick in. This means you can use your base health insurance policy to make a claim up till the deductible amount and any payments over that can be covered through a top-up plan. For example, if you have a health plan with an insurance cover of R3 lakh and you buy a top-up cover of R5 lakh with R3 lakh as the deductible, to make a claim of R4 lakh, you can use your base policy to pay R3 lakh and then the top-up to pay R1 lakh.

Price difference

The deductible feature of a top-up plan makes it cheaper because it reduces the liability of the insurance company. For example, for a 35-year-old, under the top-up plan, a cover of R5 lakh with a deductible of R2 lakh would cost around R3,000 as annual premium, while the regular indemnity product for R5 lakh cover would cost around R7,250. Unlike a regular health insurance policy on which you can make a claim at all times, a top-up policy gets triggered only if the expenses overshoot the deductible limit. This usually happens in case of a serious accident or an ailment requiring expensive treatment. You can get a better premium as you increase the deductible limit. So, a R5-lakh cover with a deductible of R1 lakh is going to cost you more than a R5-lakh cover, with a deductible of R3 lakh.

Types of top-up plans

These come as individual and floater plans. A floater plan covers more than one individual in a family and considers the number of people covered as one unit. There are two types of top-up plans. A single incidence top-up plan can be invoked only when your hospital bill exceeds the deductible during a single incidence of hospitalisation. The second type looks at aggregate claim and puts together many cases of hospitalisation to calculate the deductible.

Things to remember

Top-up policies should be used only when the cover on your existing policy in not sufficient and expenses have crossed the deductible limit. For this reason, you need to ensure that these policies are taken over and above your basic policy and the basic policy has a sum insured that can cover the deductible. Also, most of these plans are not cashless, meaning you need to pay the bills and then get them reimbursed from the insurer. So, if your insurance cover is very little or if you are only covered through your employer, you should first get yourself a basic health insurance policy and then top it up.