Let us go over top-up policies come in aid in case of severe illness exceeding the health policy amount. A general health policy pays only up to the policy limit. In case the health expenditure incurred breaches this limit, we will have to take it out from our pocket. But taking a bigger policy will cost more in premium. To help in such cases, top-ups are introduced that provide extra amount benefit with reasonable increase in premiums.
Top-up is useful when the health expenses breach the threshold limit of the policy. Insurance companies pay the amount after certain limit if top-ups are bought. It is better to take top-up policies in case you want additional coverage or you think the amount is not sufficient with growing health expenses.
For example: A person took health insurance for 3 lakhs and he incurred 4.5 lakhs in expenses from illnesses but the insurance company will pay only 3 lakhs and the remaining 1.5 lakhs has to be paid by the policy holder.
But if a top-up with 3 lakh threshold limit is bought, there is a chance of claiming the additional expenses through this topup.
Specialties of top-up policies
· The premium of topup is less than general health policies and are useful in getting more coverage for less premium.
· It is not mandatory to buy topup from the same company you have general health insurance. Top-ups from other companies can also be bought.
· Top-ups can be individual as well as a family floater for the whole family.
· Top-up policies are available from 3 lakh to 15 lakh additional insurance coverage.
· Top-up policies can also be taken without any primary health policy but the policy gets applicable only after the threshold limit.
· Preexisting diseases are covered only after 4 years.
· Expenses incurred in each hospitalization are accounted for separately but not cumulatively.
For example: If the top-up lower limit is 3 lakhs, if two hospitalizations cost 2 and 2.5 lakhs separately, they are not considered as 4.5 lakhs cumulatively but as separate entities.
· To overcome this limitation, some companies brought in super top-up where the expenses are accounted for cumulatively but these super top-ups have higher premiums.
· Generally, medical tests are not mandatory for those below 45 years to buy this policy. But if medical tests are done, 50% of those expenses will be paid by the insurance company.
· There is exemption in income tax under section 80 (D).
Things to remember:
· Top-up policies cannot be seen as replacement for general health policies but are to be considered only as ones that give more coverage with lesser premium. Health insurance provides insurance to smaller amounts but top-up policies help only when a certain limit is crossed, this has to be remembered.
· If a family floater policy is chosen, check whether the policy covers all the members of the family. Some policies do not cover parents.