Are you aware of this restriction about super top up insurance policies?

Super top insurance covers are essential to handle large hospital bills. However, they suffer from a restriction that is not so obvious. Here is what you need to know

Published: January 22, 2020 at 1:21 pm

Super top-up health insurance covers medical expenses above a threshold. In this day and age of ever-increasing medical costs and complex medical tests and procedures, a large medical insurance cover is extremely important. While super top-up insurance is an essential purchase, they suffer from a restriction or limitation that buyers need to be aware of.

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How much health insurance do we need? There is no clear cut answer to this important question. The only practical answer is, “as much as we can afford”. Top-up insurance makes a big difference in the cost.

The cost of a base health cover of say Rs. 5 Lakh plus a super top-up of say Rs. 20 lakh would be 30-40% lower (typically) than a base health cover of Rs. 25 lakh. Why? Insurance is a game of probability. The insurer is betting that a medical expense of more than Rs. 5 lakh is less likely and is willing to offer the top-up at a lower cost.

Top up or super top-up cover? In the above example, we considered super top-up insurance of Rs. 20 lakh. This will come with a deductible of say Rs. 5 lakh. This means the super top-up cover will kick-in only if the hospital expense is above Rs. 5 lakh.

For a single claim, there is no difference between the two.  If there is the possibility of multiple claims in a year, especially when you have a floater base policy, then a super-top has an edge (and therefore more expensive than a top-up).

In a super top-up, the cover kicks in when the sum of all medical expenses incurred in a policy year, across claims is above the deductible. For a top-cover, each claim has to above the deductible. You can see examples and how to choose a policy here: How to buy a Super Top-up Health Insurance policy. For a personal account, see: Finally got me a Super Top Health Insurance.

If you are looking to buy a base or super top-up health insurance policies, then here are some useful resources:

What is the restriction with super top-up and top-up insurance policies?

In general, for any insurance policy cashless is more a privilege than a right. The hospitalization has to be in a network hospital, the cost and course of treatment proposed by the hospital should be fairly acceptable to the insurer to allow cashless claims.

For a non-network hospital and in case the insurer has doubts about the treatment or illness, they would ask the insured to first pay for the treatment and then apply for reimbursement.  This means, in spite of having a health insurance cover, we must pay out of our pocket first.

This can be problematic with a top-up or super top-up insurance cover. Typically top-up claims are handled via reimbursement mode. Only in the rare case where the base and top-up policies are from the same provider and if the insurer is satisfied enough a top-up cashless claim be entertained.

Consider a “small” base+ top-up combinations, say for example Rs. 5 Lakh + Rs. 20 Lakh and a total hospital bill of say Rs. 15 lakh. Rs. 5 lakh would be paid by the base cover (say by cashless) and the insured will have to Rs. 10 lakh out of their own pocket first and the only claim it back via the top-up or super top-up policy.

Nowadays insurers have started offering large top-up policies: Rs. 25/50/75 or 100 lakhs. For a person who is not a crorepati an Rs. 100 lakh top-up cover may be affordable. However, that entire Rs. 100 lakh health insurance will not be available to him at the time of need.

Say the person has only Rs. 25 lakh net worth then the effective top-up insurance is only Rs. 25 lakh and not Rs. 100 lakh. This is because most top-up claims, especially for such amounts, would be via reimbursement. When the person can only afford Rs. 25 lakh, the claim would be of that amount only.

Buying super top insurance of several lakhs is no doubt a good idea and should be done if the premium is affordable. However, this limitation of handling claims via reimbursement and the need for a comparable liquid net worth to first handle expenses must be recognized by the buyer.

Opting for a super top-up policy from the same company as the base policy could be reasonable choice but may limit the total insurance cover.


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