I discuss how to buy a super top up health insurance policy with examples on how it differs from a top-up policy and a base policy and why we need one. With medical costs increasing day by day, a medical cover of just a few lakhs will not be sufficient for us. Every day I am hearing accounts of medical bills in tens of lakhs. The average upper-middle-class salaried individual is unlikely to have a personal basic health insurance coverage. Most of them rely on their corporate health cover. Even those who have one are likely to have a cover of only a few lakh. Most of us need much higher cover and a medical corpus. I shall talk about the medical corpus next week and focus on super top up health insurance in this post.
Before we do a quick note: ₹e-assemble (Re-assemble) is a series of basic steps on money management aimed at young earners.
₹e-Assemble: a recap of the steps
Many of you may be on vacation this month or in the last week of Dec. Now would be a perfect time to work on these steps.
Step 3: How to buy Term Life Insurance
* Shall continue discussing other aspects of health insurance like this post
Step 8: Coming soon: choosing accident insurance
Step 9,10 etc. : Coming soon: Starting investing and portfolio management with examples from readers.
What is a super top up health insurance policy?
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.
You can make any no of claims in a year, but the total expenses covered will be the first Rs. 5 lakh. For example:
1st claim: Rs. 2 Lakh (will be paid in full; remaining cover: 3 lakh)
2nd claim: Rs. 4 lakh (only 3 lakh will be paid; remaining cover: zero)
3rd claim: Rs 1 lakh (claim will not be paid by the normal/base health cover as the remaining cover is zero).
A top cover will help in such situations. 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. 3 lakh.
1st claim: Rs. 2 lakh (you will have to use the base cover for this as the expense is less than the deductive of 3 lakh)
If the 1st claim had been 5 lakh, you have two options:
(a) use the base policy to pay for the 5 lakh
OR (b) use 3 lakh from the base policy and the for the remaining amount (expense – deductible or 5L – 3L = 2L) use the top up policy.
Now consider the remaining amount calculation. This is equal to
hospital expenses – deductible. 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 only when:
the sum of hospital expenses in the policy year – deductive >0 is known as a Super Top Up Health Insurance Policy
Let us consider an example.
Super Top Health Insurance Policy vs Top Up Health Insurance Policy
Let us consider a base insurance policy of Rs. 3L and a Top Up with deductible of Rs. 3L and 5L cover. 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 2nd claim – deductible
So 4L – 3L = 1L —-> Top up cover will kick in.
Remaining cover for 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 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 for 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.
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.
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
remaining cover for top up = expense per claim – deductible
3L -3L = 0 —> This should be above zero for top up to kick in.
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.
As a crude analogy, a top up policy is like someone fillup up your beer glass only when it is empty while a super top up policy is like someone filling up the beer jug only when it comes empty (more er.. mileage).
Wait a minute. Policies now come up restore benefit and re-fill benefits. So do I still need top up insurance? Let us now consider this.
Top up Insurance vs Restore or Re-fill benefits
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 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
I have explained this in detail here: Apollo Munich Optima Restore Benefit vs Max Bupa Re-fill Benefit
Considering that the restore or re-fill benefit will not help if expenses exceed the sum insured and for repeated hospitalizations for the same condition, it is always a good idea to opt for Super top up insurance.
Definition of deductible in Top Up Health Insurance Policy
Example: HDFC Ergo Health Suraksha Top Up Plus (don’t let the plus fool you. It is a plain 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 Family Floater basis in case of Family Floater Policy). Deductible shall be applicable per Policy Year basis.
Definition of deductible in Super Top Up Health Insurance Policy
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 insured (individual policy) or insured family (in case of floater
If your policy wording only talks about deductible, it is only a top up plan. A super top plan must mention aggregate deductible
Pros and cons of super top up health insurance
Compare to a large individual or floater base cover or compared to a base cover that increases each year, a base+ super top up could be less expensive. For example, instead of a 15L floater cover, you can consider a 5L floater baser policy with 10-15L super top up cover with an aggregate deductible of 4L/5L .
However, please keep in mind that you must inform the super top insurer the moment (see policy wordings for exact time limit) you recognise that extra cover will be necessary for your hospital expense. The super top up insurer may ask you to apply for reimbursement instead of offering cashless depending on when the intimation was received. So you need to have a good enough medical emergency funds. This is a major concern compared to having a large floater cover. However you need to have a medical corpus anyway!
Please keep in mind Super top up also have waiting periods for pre-existing diseases. So buy it as soon as possible.
Buying super top up from one insurer with a base policy from another: This might be a disadvantage for cashless processing if the TPAs are different. But not all insurers offer top-ups. So it is, what it is.
How to buy a super top up health insurance?
The features of a top up insurance are pretty much similar to that of a base policy* . So the main features of the super top up should be similar if not better than the the base policy. Keep in mind these conditions while buying super top up health insurance:
1: no room rent sub-limits (if you can afford it)
2: No co-payment at any stage or age (unless you opt for it to lower premium)
3: No claim bonus (if any**) should not decrease the year after a claim has been made.
4: low waiting period for pre-existing conditions. No special waiting periods for any condition relevant to you.
5: day care treatment should be comprehensive.
6: should offer to cover at least 30 day pre- and 60-120 day post-hospitalization treatment cost
7: Most important: Read the claim notification and application procedure in the policy document (not on the website, not in the brochure). If they talk about reimbursement a lot, avoid the policy. It should be easy to apply for cashless in a super top up (but may not be)
If possible buy it from the same insurer as your base policy.
Always have a decent base cover amount of at least Rs. 5 lakhs and then buy super top up for 10-15 lakh cover. Your deductible can equal to your base cover or a bit lower (say 4L), just in case.
* There are some differences. Domiciliary treatment or treatment at home for more than 3 days when hospitalization, although required, is not possible due to non-availability or inability to transport the patient will usually not be covered by super top ups. Ambulance charges will not be covered.
** no claim may not be applicable to top up policies
Compare Super Top Up Health Insurance Policies
There are a few portals that offer this (do not enter real email or real phone numbers). This is one from insurance pandit Use it only for basic feature comparison. Please read policy wordings.
That is about it. Next week I will talk about building a health corpus and wrap up this weekly health insurance series. I am bored of comparing policies. If you would like to make a comparison and send it to me, happy to consider it for a guest post (but you must not be a blogger and do not write it before contacting me)
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