What is the best way to combine base and super top-up health insurance policies?

Published: November 20, 2022 at 6:00 am

A reader writes, “Can you please write an article on the best way to combine a normal (base) health insurance policy with a super top-up policy? That is, how much should the base insurance be and how much the super top-up policy?”

First let us point out some helpful resources for those looking to understand more about health insurance and how to buy one:

Now, we shall begin by appreciating that insurance is a game of probability. Why are super top-up policies less expensive than normal (or base) health insurance policies?

Top-up policies come with a deductible clause. They will not pay out if the expenses are less than or equal to the deductible amount.  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,


🔥Enjoy massive year-end discounts on our courses and robo-advisory tool! 🔥
Get free money management solutions delivered to your mailbox! Subscribe to get posts via email! (Subscribers get exclusive discounts!)
 
New Tool! => Track your mutual funds and stocks investments with this Google Sheet!
  • If you claimed Rs. 5 lakhs from a base policy, the top-up would pay Rs. 1 lakh
  • If you claimed Rs. 3 lakhs from a base policy, the top-up would pay Rs. 3 lakhs
  • if you did not have a normal policy, the top-up would pay Rs. 3 lakhs. For more examples, see the FAQ article linked above.

The higher the deductible, the lower the price (for the same amount of coverage). This is because the probability of an Rs. 5 lakh expense is much lower than that of an Rs. 1 lakh expense. Expenses here means hospitalization expense for the insured and potential payout or loss for the insurer.

So a top-up policy (in this article, top-up shall always mean super top-up). with an Rs. 1 lakh deductible and Rs. 10 lakh cover will cost more than one with Rs. 5 lakh deductible and Rs. 10 lakh cover.

Another key aspect of top policies is to be understood before we think of base + super top-up combinations.

  • If the base and super top-up policies are from different insurers, we will have to pay the hospital bill and then claim from the top-up insurer. So there is little use in saying I have Rs. 1 crore super top-up unless you have that much in cash (liquid net worth)!
  • Even if both policies are from the same insurer, the chance of reimbursement is high if the insurer has some doubt about the expense list furnished by the hospital. Of course, the sales guys would say they would “assist” during claims, but that is more of a sales pitch. You cannot bank on that.

Therefore ideally, the higher the base insurance, the lower the chance of using the super-top policy. This may seem strange to some. They would ask, “what is the use of a super top-up then?”

I see it the following way: Suppose you have an emergency fund of Rs. 1 lakh and an additional (liquid) net worth of Rs. 10 lakh. Small emergencies can be handed out without touching the net worth.

However, our goal is to ensure the net worth grows untouched as much as possible. So not only should we build a large emergency fund, but we should also feed it constantly.

So suppose you opt for an Rs. 5 lakh base policy and a super top of Rs. 50 lakh with an Rs. 5 lakh deductible, I would recommend gradually increasing the base policy each if you can afford it. It matters little if the base policy has a cover higher than the deductible.

How to combine base and super top-up health insurance policies

  • Health insurance purchase (unlike term insurance) is all about how deep your pockets are.
  • There is no right or wrong base + top-up combo. We have to make peace with what we can afford.
  • If you buy a Rs 5L base + super top-up (Rs. 5L deductible, 50 L cover), increase the base policy by small amounts each year. The insurer may not hike the cover (that year) if you have made a claim the previous year. You can increase the super top-up coverage down the line. Do not increase the deductible, though.
  • The above recommendation also applies to an Rs. 10 L base cover.
  • If you can afford it, buy Rs. 25 L base cover (family floater or individual) with a super top-up of Rs. 1 Crore coverage (family floater) and a deductible of Rs. 10 lakhs from the same insurer (if possible). This will reduce the dependence on the super top-up policy (which is, anyway, quite inexpensive). At the time of writing, this seems like a robust combination. Medical inflation will hike these numbers a few years later.
  • Most important: Try to invest a little extra for your financial goals. That extra can serve as an emergency medical corpus. See: Why we all need a corpus for medical expenses and how to build it.
Do share this article with your friends using the buttons below.

🔥Enjoy massive year-end discounts on our courses and robo-advisory tool! 🔥
Use our Robo-advisory Excel Tool for a start-to-finish financial plan! More than 1000 investors and advisors use this!
  • Follow us on Google News.
  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Join our YouTube Community and explore more than 1000 videos!
  • Have a question? Subscribe to our newsletter with this form.
  • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Get free money management solutions delivered to your mailbox! Subscribe to get posts via email! (Subscribers get exclusive discounts!)
 
Explore the site! Search among our 2000+ articles for information and insight!

About The Author

Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitter or Linkedin or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation for promoting unbiased, commission-free investment advice.
  Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
Our new book for kids: “Chinchu gets a superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both boy and girl version covers of Chinchu gets a superpower.
Most investor problems can be traced to a lack of informed decision-making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it and teach him several key ideas of decision making and money management is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low volatility stock screeners.
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download)