FAQ: Super Top up Health Insurance policy

Published: May 2, 2022 at 6:00 am

Last Updated on May 6, 2022

In this edition of “FAQ”, we shall discuss some common questions about Super Top-up Health Insurance policies.

Previous editions in this series include:

  1. FAQ on index investing
  2. FAQ on Mutual Fund Systematic Withdrawal Plans (SWPs)
  3. FAQ: Target Maturity Debt Mutual Funds
  4. FAQ: How inflation affects our ability to manage money
  5. FAQ on gilt mutual funds: essentials investors should know

1. What is a top-up health insurance policy? Top-up health insurance comes into effect only after a certain sum has already been spent on hospitalization. This sum is known as the deductible.

There are two types of top-up policies: (plain) top-up and super top-up. We will consider the difference below. First, let us take a simple example.


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Example: To understand how top-up insurance works, the idea of a “deductible” must be understood. In a normal health insurance policy, if the cover is Rs. 5 lakh, in any policy year it will cover hospitalization expenses up to Rs. 5 lakh.

We shall use the terms “base health insurance” or “base cover” to represent a normal health insurance policy. These are colloquial terms and have no technical or legal standing.

You can make any no of claims in a year, but the total expenses covered will be the first Rs. 5 lakh. For example:

Your hospitalization costs Rs. 6 lakhs. The base insurance policy will only cover Rs. 5 lakhs. If you want coverage beyond Rs. 5 lakhs a top-up policy can help.

However, a top-up cover will only come into play after a certain amount has already been spent. This is known as the deductible.

Consider a top-up policy with a threshold/deductible of Rs. 5 lakh and a cover of Rs. 10 lakhs.

In the above example, the total expense is Rs. 6 lakhs. The top-up policy with pay Rs.1 lakh. The top-up will pay up to Rs. 10 lakhs beyond the deductible amount of Rs. 5 lakhs.

Key takeaway: It does not matter whether you have a normal health policy or not. A top-up will pay only if the expenses exceed the deductible.

Suppose the top-up policy had a deductible of Rs. 3 lakhs and a coverage of Rs. 5 lakhs.

For an expense of Rs. 6 lakhs,

  • If you claimed Rs. 5 lakhs from a base policy, the top-up will pay Rs. 1 lakh
  • If you claimed Rs. 3 lakhs from a base policy, the top-up with pay Rs. 3 lakhs
  • if you did not have a normal policy, the top-up will pay Rs. 3 lakhs.

For an expense of Rs. 12 lakhs

  • The base policy will pay Rs. 5 lakhs (if that is the max cover allowed) and the top will pay Rs. 5 lakhs. The remaining two lakh will have to be paid out of pocket.

It should be obvious that having a large enough base policy is important. If the base cover is small, then the top-up will need to be invoked often. This is a hassle that should be minimised (see below).

When there is only one claim made per year, things are easy to understand.

2. What happens when there are multiple claims made? This leads us to the difference between a top-up and super top-up policy.

A deductible based policy pays if

hospital expenses – deductible > 0

A natural question to ask is: “how is hospital expense defined? Is it per claim or the sum of claims made in a year?”

A policy that pays only when:

hospital expense per claim – deductible >0 is known as a Top Up Health Insurance policy

A policy that pays if:

the sum of hospital expenses in the policy year – deductive >0 is known as a Super Top Up Health Insurance Policy

Key takeaway: For a top-up policy, each claim made should exceed the deductible. For a super top-up policy, the sum of total claims made in a policy year should exceed the deductible.

Let us consider an example.

Super Top vs Top Up Health Insurance Policies

Let us consider a base insurance policy of Rs. 3L and a Top Up with a deductible of Rs. 3L and 5L cover. The super top also has the same 3L deductible and 5L cover.

Example 1: Single claim of Rs 3L

The base policy will pay this 3L. Both top-up and super top-up cannot be used here as the 3L does not exceed the 3L deductible.

Example 2:  single claim of Rs. 4L.

The base policy will pay 3L and both top-up and super top will pay the extra 1L. Why?

Remaining cover for top-up: expense for the single claim – deductible

So 4L – 3L = 1L —-> Top-up cover will kick in.

Remaining cover for the super top: total expenses for that year – deductible

So 4L- 3L = 1L —–> Super top-up cover will kick in.

Moral: If there is only one claim, there is no difference between a top-up and super top policies with the same deductible and cover (other terms being the same)

Example 3: Two claims, 1st for 2L and 2nd for 2L.

First, claim the base policy will cover 2L.

Now for the second claim, the base policy will cover 1L and 1L remains.

The top-up policy will not cover this 1L. Why?

remaining cover for top-up = hospital expense per claim – deductible.

This is 2L – 3L = -1 L. Therefore the top-up cover will not kick in. That is, each claim should exceed the deductible for the top-up to pay.

However, a super top-up policy will cover this 1L. Why?

remaining cover for super top = total hospital expenses – deductible

(2L + 2L) – 3L = 1L —> Super top-up cover. will kick in.

Example 4:  Let us try one more:

1st claim: 4L, 2nd claim: 3L.

1st claim: base policy will cover 3L and top up will cover 1L as the expense for that claim is above the deductible of 3L.

The super top will also cover the 1L

2nd claim (Now things get interesting): The base policy will not cover the 3L as it is already exhausted.

The top-up will also not cover the 3L as

the remaining cover for top-up = expense per claim – deductible

3L -3L = 0  —> This should be above zero for top-up to kick in. The second claim has not exceeded the deductible.

However, the super top-up will cover the 3L from the second claim. Why?

Remaining cover for super top-up = total hospital expense – deductible or

(4L +3L) – 3L = 4L —> Therefore the super top-up cover will kick in.

Clearly super top is more advantageous in the case of multiple claims and therefore more expensive (obviously!)

Top up policy will kick in only if each claim is above the deductible. Super top-up will kick in if the sum of total claims is above the deductible.

Because of this difference, Super top policy will have “aggregate deductible” in their terms and conditions while top-up policies will only mention the deductible. This is how you differentiate them and not by mere policy name names.

Example: HDFC Ergo Health Suraksha Top Up Plus (This is a top-up policy)

Deductible: We are not liable for any payment unless the Medical Expenses exceed the Deductible (as opted on an Individual basis in case of Individual Policy and on a Family Floater basis in case of Family Floater Policy). The deductible shall be applicable per Policy Year basis.

Example: HDFC Ergo Health Medisure Super Top Up Plus

Aggregate Deductible: Aggregate deductible is a cost-sharing requirement under this Policy that provides that the Company will not be liable for a specified rupee amount of the covered expenses, which will apply before any benefits are payable by the Company. A deductible does not reduce the Sum Insured. The deductible is applicable in aggregate towards hospitalization expenses incurred during the policy
period by the insured (individual policy) or insured family (in case of floater
policy)

If your policy wording only talks about the deductible, it is only a top-up plan. A super top plan must mention “aggregate deductible”

3. Normal Policies now come with “restore benefits” and “re-fill benefits”. So do I still need to take top-up insurance? 

What is restore benefit? If you have a cover of 3L and completely exhaust it in a policy year the cove will be restored to 3L. But this restore benefit is only for subsequent claims and not for the same/related hospitalization of the same person

What is a re-fill benefit? If your cover is partial or completely exhausted in a policy year, then the cover will be re-filled up to the sum insured. But this re-fill cover is only for subsequent claims and not for the same/related hospitalization of the same person

The restore or re-fill benefit will not help if expenses exceed the sum insured and for repeated hospitalizations for the same condition. This is why it is always a good idea to opt for Super top-up insurance.

4. Why are top-up policies less expensive than normal policies? Insurance is a game of probability. The insurer bets that the probability of a 1L claim is much higher than a 10L claim. Hence top-up policies cost less. Also higher the deductible, the lower the cost for the same sum insured.

5. Is it easy to get a claim from top-up policies? The short answer is, not without some forethought. We recommend buying both the base and super top-up covers from the same insurer to minimise paperwork and increase the chances of securing a cashless option for the super-top-up claim.

If the base and top-up policies are from different insurers, then you will have to make the top-up claim only via reimbursement. So even if your top-up cover is for Rs. 1 crore, and you have only Rs. 50 lakhs as net worth, the effective cover is only Rs. 50 lakhs.

6. How much super-top insurance should I have? A better question is, “how much base insurance cover should I have?”. We recommend having at least Rs. 10 lakhs of base insurance. You could then buy a super-top up with a deductible of Rs, 10 lakhs and the maximum coverage that you can afford.

The higher the base cover, the lower the chances of invoking top-up insurance which should be our goal!

7 Can I buy a super top-up with a low deductible of say Rs. 3 lakhs and a large cover? I can afford to pay the Rs. 3 lakhs for hospitalization. Yes, you can. It would be a waste of money though and we do not recommend it.

8 I have a planned hospitalization schedule which costs Rs. 15 lakh. My base cover is Rs. 5 lakh. Can I get cashless from my super top-up and get Rs. 5 lakh reimbursed from by base insurer?

I assume you want to do this because both policies are from different insurers and you want to limit the reimbursement to Rs. 5 lakhs and not Rs. 10 lakhs. Yes, you can do this. You will however have to inform both insurers in advance suitably.

9 Can I buy a super-top up in addition to my company cover? You don’t need a base cover or company cover to buy top-up insurance. However, unless your job is guaranteed, we recommend a robust base cover as well regardless of your company cover.

10. Should the start date of the Super-top policy be the same as that of the base policy?

Ideally yes. This is because the super top-up policy factors in total hospital expense in its policy year.

Consider a base policy that is active from Jan 1st to Dec 31st.  Let us first assume the super top-up (deductible 3L) also is active in the same period.

Let us take the same numbers from the above example 4.

1st claim: 4L, 2nd claim: 3L.

1st claim: Super top will pay if total hospital expense – deductible > 0
4L-3L =1 L >0. So no problem.

2nd claim  (4L+3L)- 3L = 4L >0. So super top-up will pay the second claim also.

Now if the super top-up is active from Feb 1st to 3st Jan while the base policy is active from 1st Jan to 31s Dec.

If the 1st claim occurs between Jan 1st and Feb 1st and the second in Aug.

1st claim: Super top will pay if total hospital expense – deductible > 0
4L-3L =1 L >0. So no problem.

2nd claim: This has occurred in a new policy year for the super top-up but in the same policy year as the base policy.

So let us check if total hospital expense – deductible > 0

Total expense is only 3L (the second claim)

3L -3L =0. The super top-up will not cover this.

11. My super top-up policy and base policy years start on different dates. What should I do? It is not the end of the world. The probability of a claim occurring in between the two policy start dates is small (especially if the gap is not too much). So you can take that chance.

12 How to buy super top-up health insurance?

The key features of top-up insurance are pretty much similar to that of a base policy. Here are some resources to help you make a choice.

  1. SEBI RIA Melvin Joseph releases free e-book: Health Insurance Simplified
  2. Download a Health Insurance Policy Comparison Spreadsheet
  3. Dos and Don’ts while purchasing a health insurance policy
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