If you want to increase the amount of health cover you have, a cheaper way is to top up your existing health plan rather than buying a new policy.
What are top-up plans?
A top-up health insurance plan, also called add-on plan, is a regular indemnity plan that covers hospitalization costs. However, unlike a regular hospitalization policy that does not have a deductible, top-up policies come with a huge deductible.
A deductible is that portion of the claim amount that is not covered by the insurer and has to be paid by the insured first before the benefits of the insurance policy can kick in. So a deductible of Rs 3 lakh in a top-up policy means that expenses up to Rs 3 lakh will have to be borne by the insured himself. Only the expense that is upwards of Rs 3 lakh will be covered by the top-up health insurance policy and up to the sum insured chosen.
You can use your individual health insurance policy or group policy provided by your employer to cover the initial expenses. In fact, the rationale behind top-up health insurance policies is to enable you to increase your existing health cover at an affordable cost.
How are they better than stand-alone policies?
Because of a huge deductible, they are cheap. To illustrate, Bajaj Allianz General insurance Co. Ltd offers Extra Care, a top-up health insurance policy. For a sum insured of Rs 10 lakh and a deductible of Rs 3 lakh the policy charges Rs 2,500 from a 30-year-old. But for Health Guard, a basic indemnity policy from the same insurer, the premium will be Rs 10,913 for a sum assured of Rs 10 lakh for a 30-year-old.
The primary reason why top-up plans charge less is the deductible clause. Unlike a regular health insurance policy which can be invoked at all times in case of hospitalization, top-up policies get triggered only if the expenses overshoot the deductible limit. This usually happens in case of a serious accident or an ailment requiring expensive treatment.
Watch out for
These are top-up policies and must be invoked only when the cover on your existing policy in not sufficient and the expenses have crossed the deductible limit. For this reason you need to ensure that these policies are taken strictly over and above your basic policy and that the basic policy has a sum insured which can cover the deductible limit.