₹6,818 is what it cost me to increase our family health cover from ₹20 lakh to ₹5 crore using a top-up policy. We are in our mid-50s with two children in their 20s.
This is, by a large margin, the most cost-effective way to increase your health cover. Few financial products allow you to increase protection 25 times for the price of a meal out.
This is why I often advocate top-up insurance—sometimes also called super top-ups—to friends and family. Think of base insurance as first-loss protection and top-ups as catastrophic illness cover.
The questions I am asked most often are: Why is the top-up so cheap? How does one claim? Are there regulatory safeguards? Are there exclusions? How should one buy a top-up?
Here are the answers. The top-up plans that I refer to in this column are those where the deductible applies to total annual claims, not per hospitalization.
Why so cheap?
Top-ups are cost-effective because of the deductible.
The deductible is the portion of medical expenses that you must bear before the top-up policy begins to pay. Having a deductible lowers the cost. The larger the deductible, the lower the premium.
The initial expenses can be borne by another insurance—say your base health cover—or paid by you. The insurer is not concerned about who pays the initial expenses, only that the expenses have been incurred.
Deductibles significantly reduce premiums because, for most policyholders, health care costs will fall within the deductible amount. This means there will be relatively few claims where the top-up insurer has to pay.
So when you think about top-ups, remember: these are meant for severe diseases—illnesses that could financially ruin you.
Big cover, small cost
In top-up insurance, increasing the sum insured has a relatively small impact on the premium.
Buying a ₹5 crore sum insured instead of ₹1 crore, both with a ₹20 lakh deductible, costs less than ₹2,000 more for a 50-year-old. This is because the statistical probability of claims exceeding ₹1 crore is small.
Many people hold low sum insured policies, often bought years ago from public sector insurers. A top-up offers an effective way to significantly increase coverage without giving up a long-standing base policy.
Do you think ₹5 crore of cover is excessive? I don’t. I frequently see claims of ₹30–50 lakh. Two decades of medical inflation can turn today’s ₹50 lakh bill into several crores.
If your base plan has room-rent caps or other sub-limits, those affect how much of the deductible is considered used. Coordination between policies matters.
Claims process
Claims under a top-up plan can be cashless.
A top-up claim can be cashless if you demonstrate that you have already incurred the deductible amount as a health expenditure. If the deductible has not been fully incurred, the insurer is likely to ask you to file for reimbursement.
The claims process in a base-plus-top-up combination is not as seamless as a single base policy—but it works effectively with proper documentation.
Regulatory safeguards
Regulators have strengthened policyholder protections in recent years:
- Waiting periods for pre-existing diseases are capped at three years.
- After five continuous years of coverage, insurers cannot reject claims except in cases of proven fraud.
- Premium revisions must apply to entire age bands, not individuals.
These safeguards apply equally to top-ups.
Policy exclusions
Exclusions in top-ups are similar to those in base policies.
Standard waiting periods apply, including for pre-existing conditions. In some cases, certain illnesses may be permanently excluded. Policies also include a standard list of non-payable items.
These exclusions are regulated and broadly consistent across products.
Choosing deductible
Deciding the deductible is the first and most important step.
Ideally, the deductible should be close to the sum insured of your base health plan. Then decide how much additional cover you want. Opt for as large a sum insured as your budget allows.
Since this is a relatively new category, premiums vary significantly across insurers. For example, ₹1 crore cover with a ₹20 lakh deductible for a 50-year-old can cost anywhere between ₹1,500 and ₹15,000 annually.
It is essential to compare premiums across at least three to four insurers.
For many years, I held two base health plans. Together, they cost over ₹1.5 lakh annually and provided a total sum insured of ₹1 crore.
After introducing a top-up plan, I discontinued one base plan. The result: total coverage increased to about ₹6 crore while the annual cost reduced to ₹75,000—half my earlier expense.
For most readers, the real financial risk is not a ₹5 lakh hospital bill. It is the ₹1 crore one.
Top-up insurance is the most economical way to insure against that catastrophe.