What to look for when you buy top-up health insurance

The coronavirus scare has made families realise that a larger sum insured for health insurance policy is required for hospitalisation; the most cost-effective way of widening coverage is by buying a top-up cover over and above the base policy

Kumar Shankar Roy Jun 14, 2020

Health insuranceOne of the Facebook posts that went viral is about the schedule of charges for treatment of Covid-19 patients at a hospital chain based in New Delhi. Per day charges of private room isolation are Rs 30,490. Daily charges for ICU without a ventilator is Rs 53,060. Charges for ICU with a ventilator per day is Rs 72,550. This is not a stray case. Around India there are many hospitals that are charging top dollars for treatment. Any middle-class family which takes admission and undergoes Covid-19 treatment in such hospitals is sure to get in debt. The coronavirus scare has made families across India realise that a larger sum assured for health insurance is required for hospitalisation. Today, it is Covid, tomorrow it could be a bigger health situation.

Some families have a base cover, usually this is a floater with a cover of Rs 4-5 lakh. Only top employers allow parents of employees to be covered, and in most cases such total coverage is about Rs 10-12 lakh. These amounts may seem big, but complicated treatments at high-quality hospitals cost a lot of money. Increasing base policy coverage comes with a commensurate increase in premium. For instance, a Rs 5-lakh health policy for two adults aged 40 years is Rs 12,000 per year and for a Rs 10 lakh health policy for the same adults is Rs 15,500. But if you buy a Rs 5 lakh policy (Rs 12,000) and a top-up of another Rs 5 lakh (premium is Rs 2,000), you can get total Rs 10 lakh coverage but at 10% lower cost.

The most cost-effective way of widening coverage is by buying a top-up cover, which kicks in after a deductible. Medical expenses up to the deductible limit (can be covered under the base policy) have to be borne by the policyholder. The insurance company providing the top-up takes charge of medical cost if the expenses cross the deductible limit. In this article, we will discuss how to buy a top-up cover, and what are the top things you must remember before buying them.

Check entry age, medical check-up cost reimbursement

One of the most important things for a top-up policy is age eligibility. Mind you there may be two different eligible ages: for instance, ICICI Lombard Health Booster top-up policy under individual plan has a minimum age of 6 years while children aged minimum 3 months can be insured under a floater plan only. However, Star Super Surplus (Floater) insurance policy has the same 91-day minimum age for both individual and floater options. The maximum age of covering unmarried dependent children is between 21 to 25 years in most policies.

Also, some policies have a restriction on maximum entry age. Typically, persons over 65 years of age are disallowed in terms of top-up coverage. There are some plans who offer a higher maximum age for entry like Bajaj Allianz Extra Care (70 years). In policies like SBI General Arogya Top-Up policy, the maximum entry age is allowed at 70 years if the deductible is Rs 5 lakh. Also, some top-up policies have mandatory co-payment options for any claim if the covered person is above a certain age (usually 60 years). In such policies, the aged person will have to pay 15-20% or more of the claim amount under the policy and the balance is paid by the top-up policy.

Mind you that there is a medical check-up above 55 years. Typically, 50% of the check-up cost is reimbursed if the policy is accepted by the company.

Pre-existing diseases, waiting period

A top-up insurance policy is an extra policy. All insurance companies want to cover customers who are least likely to give claims. Naturally, people with pre-existing diseases are given insurance coverage but with restrictions.

Pre-existing diseases (PED) is covered by a top-up policy usually 2-4 years of continuous coverage. Once you cross the threshold of that waiting time, your PED is covered by the insurer and so any claim linked to it will be admitted. HDFC Ergo Health Suraksha Top Up, Religare Enhance-Top Up, Future Health Surplus, Tata AIG MediPlus etc. cover pre-existing conditions after 4 years. Depending on the plan, waiting period for period coverage can be 12 months to 24 months in the case of Star Super Surplus top-up policy.

One of the good things is that if PED was declared while taking the base policy, that time may be adjusted when you buy the top-up policy.

Relationships covered

If you want to cover a large family in base and top-up policies, pay attention to the number of relationships covered. Some top-up plans allow more than a dozen relationships under the policy (individual plan). In case of floater plans, there can be a cap on the number of adults and children in a single policy.

Deductible limit

Top-up health insurance works on the principle of policy deductible. A deductible is the predefined amount that you will bear, through your own finances or any other insurance (base cover), during a medical event. Any amount over and above policy deductible will be borne by the top-up insurance company. If you opt for a Rs 10 lakh sum insured with deductible of Rs 2 lakh, then Rs 2 lakh will be borne by you/base cover and the rest (upto Rs 10 lakh) will be borne by the insurance company.

Assume you already have a Rs 5 lakh family floater cover. You want to enhance it to Rs 10 lakh by buying Rs 5 lakh top-up. In this case while choosing the deductible amount, do not opt for Rs 5 lakh deductible. This is because typically companies pay 80% of insurance claims (for retail customers). Hence, you have a bright chance of getting a Rs 4 lakh paid claim of Rs 5 lakh base cover sum insured. If the deductible is Rs 5 lakh and the actual claim is RS 10 lakh, the base cover pays Rs 4 lakh and you will have to pay Rs 1 lakh out of your own pocket so that the top-up cover kicks in (at Rs 5 lakh). So, try to select a top-up deductible which is 80-85% of your base cover sum insured.

Sub-limits for expenses

A top-up health policy could have sub-limits that can restrict the extent of coverage of your policy. Such sub-limits can cap the claim amounts with respect to room rent, donor expenses, doctors’ and operation theatre (OT) charges etc. There are various sub-limits on specific types of surgeries and treatments too. No one can predict which surgery or treatment you may require in future. If sub-limits are restrictive, it can defeat the entire purpose of buying a top-up i.e. extra cover when you need it.

Make sure your super top-up plan does not have any restrictive sub-limits. In case the policy you have chosen to buy has sub-limits, make sure the sub-limits are as low as possible. Compare 2-3 top-up policies to see which one offers lower sub-limits.

Check for donor expenses coverage in top-up policy. Hospitalisation expenses, as incurred by the organ donor for undergoing organ transplant surgery for your use, would need to be covered. Donor expenses can be substantial depending on the organ transplantation requirement.

Note the exclusions

Watch out for exclusions in your chosen top-up health policy. The top-up insurance company is not liable to make any payments related to exclusions mentioned in the policy.

Common exclusions include conditions rising from Congenital External Condition / Defects / Anomalies, Intentional self injury, 5. Use of intoxicating substances, substance abuse, drugs / alcohol, smoking and tobacco chewing, Venereal Disease and Sexually Transmitted Diseases, Unconventional, Untested, Unproven, Experimental therapies, Stem Cell Therapy, All types of Cosmetic, Aesthetic treatment of any description, Change of Sex, Plastic surgery (other than as necessitated due to an accident or as a part of any illness), Treatment arising from or traceable to pregnancy, childbirth (except to the extent covered under Delivery Expenses), family planning, miscarriage, abortion etc.

Don’t fall for marketing gimmicks

Top-up policies are expected to cover in-patient treatment (for hospitalisation as an in-patient for a minimum period of 24 consecutive hours). All policies deliver in-patient treatment coverage. So, this is not an USP of any top-up policy. Focus on pre-hospitalisation and post-hospitalisation coverage tenure (usually expressed as a number of fixed days). Many treatments may require a long duration of either pre or post-hospitalisation treatment/expenses, and if the top-up covers that duration, it is beneficial for you.

Many top-up policies will advertise that they cover AYUSH treatment (expenses for Ayurveda, Unani, Siddha and Homeopathy (AYUSH) treatment). These expenses are not very large and so can be paid out-of-pocket with base cover too.

Similarly, covering day care treatments are not an USP if claimed by any top-up plan. Day care treatments require less than 24 hours hospitalisation. Of course, the higher number of day care treatments (as mentioned in the day care surgeries list) may be an advantage. Do note that day-care treatments are not usually very expensive and can be covered under Rs 2-3 lakh generally.

Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. Kumar is a financial journalist, with a functional experience of 15 years. He tracks mutual funds, insurance, pension, PMS, fixed income/debt and alternative investments markets closely. He has worked for The Times of India, The Hindu Business Line, Deccan Chronicle Group, DNA, and Value Research, among others, across different cities in India. He is deeply interested in marrying data insights with actionable opinion. He can be contacted at [email protected].

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