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Top up now, move to bigger health cover later

Affordable way to enhance health insurance is to take top-up plans over and above the existing plan

As far as health insurance needs go, being covered under the corporate group plan of your employer or buying a policy for a tiny sum insured of, say, 1-2 lakh is not enough. In fact, this is the most common mistake that people make with health insurance: settle with little cover or one given by the employer. Medical costs have skyrocketed and the process to port health insurance from a corporate plan to an individual plan is not smooth. “Even as porting from group plan to individual plans is allowed within the same insurer, the purpose is defeated because your employer may decide to change insurers and you will have to start all over again in terms of credits on waiting period," said Kapil Mehta, managing director, SecureNow Insurance Broker Pvt. Ltd. Health insurance policies come with initial waiting periods on specified ailments and pre-existing diseases. So, when you port your policy, the rules allow you to port the expired years, thereby reducing the waiting period on the new policy.

But not everyone can afford to buy sufficient health cover. For such individuals, a health insurance top-up plan is an excellent way to increase the cover while keeping costs in check. A top-up health insurance plan is a regular indemnity plan that covers hospitalization costs but only after a threshold limit is crossed. In insurance parlance, this limit is called 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 person before the benefits of the policy can kick in. So, if you already have a health insurance policy or are covered by your employer, the deductible limit can be paid by the employer’s policy and anything above that limit by the top-up cover.

“For many, a very high sum insured of, say, 10 lakh, is often not affordable. Therefore, a better strategy would be to have a regular health insurance that one can afford and then take a top-up plan. Since top-up plans are invoked only when the base cover is exhausted, they are much cheaper than a regular indemnity cover of a similar sum insured," said K.K. Mishra, managing director and chief executive officer, Tata AIG General Insurance Co. Ltd.

In fact, top-ups in health insurance are fast becoming popular as many insurers are offering them now. Some have, in fact, gone beyond the usual to offer an option of migrating from a top-up plan to a regular plan. “Although portability allows a person to port from a high deductible plan to an indemnity plan, it however does not guarantee the porting request would be acceptable at a higher age. The insurer may either accept or reject a porting request based on the health status of the individual. The waiver of deductible on the other hand guarantees this portability without any fresh underwriting or loading and regardless of the claims status," said Antony Jacob, chief executive officer, Apollo Munich Health Insurance Co. Ltd. Mint Money reviews two such plans that were launched recently.

Tata AIG MediPlus

This plan by Tata AIG General Insurance Co. Ltd is a basic top-up plan that covers only “single incidence hospitalization". In other words, if your hospital bill exceeds the deductible limit during a single incident of hospitalization, only then can you make a claim on the top-up plan. For example, if a person gets hospitalized and the bill comes to 5 lakh, a basic top-up plan of 3 lakh deductible and 5 lakh sum insured will pay 2 lakh. But in a year, if the person gets hospitalized twice—the first time it costs him 2.5 lakh and 2 lakh the second time—the top-up plan will not get triggered at all. Even though the total bill overshoots the limit of 3 lakh, each instance of hospitalization is within the deductible limit.

MediPlus offers a fixed sum insured of 5 lakh with a deductible option of 1 lakh-5 lakh. This means, if you choose a deductible of 1 lakh, then for a single incidence of hospitalization will not cover you for the first 1 lakh and will subsequently cover you till 5 lakh. A value-add in this policy is that if you buy it before the age of 50 years, you can change this policy from a top-up cover to a regular indemnity cover when you turn 58 up till 60 years of age. This is called the waiver of deductible option, which allows you to port to any regular indemnity plan by the insurer. In other words, you can port all the waiting periods from the top-up plan to the regular indemnity plan. However, on porting, you will have to conform to the new features of the indemnity plan and premiums.

Tata AIG doesn’t offer a floater option, but allows up to seven family members under the same policy on an individual cover basis.

Apollo Munich Optima Super

This plan by Apollo Munich Health Insurance Co. Ltd is a super top-up or aggregate claims top-up plan that, unlike a single incidence plan, looks at the aggregate claim to calculate the deductible. Being a super top-up, in the example mentioned before, this plan will pay 1.5 lakh, because two claims of 2 lakh and 2.5 lakh put together crossed the deductible limit of 3 lakh in the year. Considering it covers aggregate claims, this is naturally a superior version. It also offers a sum insured from 5 lakh-10 lakh with a deductible limit of 1 lakh going up to 10 lakh. Even the waiver of deductible option is slightly more flexible.

It allows an individual to migrate to the insurer’s regular indemnity plan in the sixth policy year, or any time between 55-60 years, provided the insured bought the policy before turning 50. Again, the insured can port all waiting periods but will have to conform to the pricing and features of the new policy. “Waiver of deductible is a very good option for those who are under a group cover. While in the job, they can use the group cover to cover the deductible limit and enhance their health insurance cover through the top-up; on retirement, they can migrate their top-up policy to a regular plan with full continuity benefits and no fresh underwriting," said Jacob. This plan also offers a floater option, which means that the top-up would kick in if any family member exhausts the deductible limit.

Mint Money take

In terms of premiums, MediPlus is lighter on the pocket. For example, for a deductible of 2 lakh and a sum insured of 5 lakh, the annual premium would be 1,179 for a 35-year-old. The same would cost 2,309 for Optima Super, but it offers more flexibility and is an aggregate top-up plan. “The concept of allowing individuals to move to a regular health insurance plan is very useful, especially for those who would have lost their group health insurance cover or have no cover at all. But these plans are restrictive as they allow conversion only after a certain point," said Mehta. Given that insurers keep innovating, you may just see some improved versions of this as well.

“Earlier, the market had top-ups that covered only a single incidence, but gradually the market changed to offering super top-up covers. In a year or so, we should see more super top-up plans that will allow you to move to a regular indemnity plan more frequently," added Mehta. If you don’t have a health insurance plan or have negligible cover, you should first buy a regular health insurance policy and then top it up with these plans, preferably a super top-up plan. Later, you can always migrate to a more comprehensive health insurance plan

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