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  4. How to use top-up and super top-up health plans

How to use top-up and super top-up health plans

January 9, 2024

This article was originally published in 2021. We are republishing it for the benefit of newer subscribers.

Your health insurance policy, like your life insurance, needs periodic review and enhancement to deal with your lifestyle changes and healthcare inflation. Top-up and super-top up covers help to add on to your basic hospitalisation cover in a cost-effective manner. Here we detail their advantages, differences and which you should prefer for a comprehensive health cover.

top-up and super top-up

Q. How do they work?

Both top-up and super top-up policies are used to add to your existing hospital cover or mediclaim policy. Suppose you have bought a hospitalisation cover with a sum insured of Rs 5 lakh and would like to increase it by Rs 20 lakh. Instead of expanding your original cover (called the base cover), you can buy a top-up or super top-up policy of Rs 20 lakh, with a Rs 5 lakh deductible, to expand your total cover to Rs 25 lakh. A top up or super top up cover can be bought either from the same insurer who sold you the base plan or any other insurer in the market.

Q. What is this deductible?

With top-up and super top-up policies, you are eligible to claim reimbursement of hospital bills only if the bill amount exceeds a predefined threshold. This predefined threshold is called the deductible. Simply put, the deductible is the amount that the insurer will deduct before giving you reimbursement under the top-up or super top-up policy. 

Usually, buyers get a top-up or super top-up policy with a deductible that is equal to their base cover. This ensures that your initial expenses on hospitalisation are taken care of by the base plan and if the bill exceeds it, your top up or super top-up plan takes care of the remaining.

Q. Is it necessary to get a base health policy before buying top-up or super top-up?

No, you may buy a top-up or super top-up plan without a base policy. In this case, you will have to pay any hospital bills upto the deductible amount, out of your own pocket. If the bill exceeds the deductible, you will still need to pay the amount equal to the deductible by yourself. Only the bills exceeding the deductible threshold can be claimed from the insurer offering the top-up or super top-up policy.

Q. What is the difference between top-up and super top-up policies?

The difference lies in how they account for the deductible. A top-up policy considers the deductible on every individual claim made in a year. If you make multiple claims in a year, a top-up policy will only pay your bills over and above your deductible every time you make a claim. A super top-up policy however, counts the deductible only once in a policy year and pays subsequent claims in full. 

The example below helps you understand the difference more clearly. Assume you have a base policy of sum insured Rs 3 lakh and you increase your total cover to Rs 10 lakh  by purchasing a top-up or super top-up policy of Rs 7 lakh with a deductible of Rs 3 lakh. The below table explains how top-up and super top-up policies will work in various scenarios.

Q. So should I buy a top-up or super top-up?

A super top-up is clearly better. In the case of multiple claims in a year, super top-up will minimise your out-of-pocket expense. It is in the years when you are hit with multiple hospital bills or medical emergencies that you face a real cash crunch or run out of savings. The super top-up does a better job of shielding your savings from health emergencies than a top-up policy in such situations.

Q. Why do I need to top-up in the first place? Can I not buy a base cover that is large enough?

Using a combination of a base plan plus a top-up or super top-up plan is much cheaper, premium-wise, than having a larger base plan. A Rs 20 lakh base policy will entail much higher annual premium than a base policy of Rs 5 lakh with a super top-up of Rs 15 lakh, though both fetch you the same amount of protection. 

This is because insurers usually price their health covers based on the probability of your filing a claim. The base policy is the first one to see a claim  with any health emergency. Therefore, while selling a base policy, the insurer factors a high probability of a claim and prices their premium accordingly. With a super top-up policy, you will file a claim only if your hospital bills exceed the base cover. This carries a lower probability. Insurers accordingly charge much lower premiums on this component.  

Let’s take some live examples of how premiums on a base cover compare to a combination of a base cover plus super top-up. For a family of three -  ages 35, 32, and 3 - let’s consider a single base policy versus a base policy plus super top-up combination for a sum insured of Rs 20 lakh.

Q. Why can’t I skip a base cover totally and just buy a super top-up cover with a minimum deductible?

Yes, you can. But you will have to pay any bills upto the deductible out of your pocket. Also a base cover has three advantages that a super top-up cover is less likely to offer.

#1 Restoration benefit

Most health insurers offer restoration as an add-on benefit in a base health policy. The restoration benefit automatically refills or recharges your health cover should you deplete it through a claim. This can be quite a useful benefit when you have a family floater insurance where multiple members are covered and may make a claim in a single year. Super top-up policies generally do not allow restoration benefits. In certain circumstances therefore, a single base policy effectively provides a larger cover than a base plus super top-up combo, for the same sum insured.

Consider a scenario where a person has a family floater policy of Rs 10 lakh taken entirely as a base plan. He had to claim Rs 8 lakh for heart surgery for his father in a particular year. Later in the same policy year, his wife needed hospitalization and the bill amount came to another Rs 8 lakh. With a base cover with restoration benefit, he can claim both bills in full. 

With a super top-up cover of Rs 10 lakh with a deductible of Rs 3 lakh, he will not get full reimbursement. His policy will meet Rs 5 lakh out of his first claim (Rs 8 lakh claim minus Rs 3 lakh deductible) and Rs 5 lakh out of the second claim (the deductible won’t apply but half his cover has already been exhausted). 

Therefore, if you plan to get a family floater and see the likelihood of multiple claims in a year, you will need to take a higher base cover and lower super top-up. If you are only looking to cover yourself, and think multiple claims in a year are unlikely, you can take a nominal base cover and maximise your super top up to save on premium outgo.

#2 No claim bonus

Insurance buyers love the word bonus. In health insurance plans, no-claim bonuses (NCBs) are offered only on your base policy and not on top-up covers. A NCB gives you a discount on your premium or enhances your cover by a certain percentage for every year in which you make no claim under the policy. The second kind of NCB is quite useful because it can help you automatically expand your health cover without buying a top-up plan or shelling out extra premium. However, insurers do set an overall cap of 50% to 200% on the total amount by which you get to expand your original cover through NCBs. 

Take the case of a Rs 10 lakh base policy with a 20% NCB per year which you bought at age 25, with a maximum limit for expansion of cover at 100%. If you don’t make claims until 30, you will automatically have a health cover of Rs 20 lakh by age 30. If you opted for a Rs 5 lakh base policy plus a Rs 5 lakh super top-up, the NCB will only be applicable on your base policy and not on your super top-up. Your cover with NCB will be only Rs 15 lakh at age 30. 

You must however attach a high value to NCB only if you are quite confident of making no claims for successive years to actually earn the benefit. Else, saving premium upfront through a base plus super top-up combo is the surer bet. You are less likely to be able to earn NCBs if you have older family members covered in your family floater policy.

#3 Ease of claim

In earlier articles we have highlighted how tough it is to actually get health insurers to pay your hospital bills. We also know from personal experiences that negotiating with the health insurer when a family member is being discharged from the hospital is extremely painful. When you have a single base plan, you will need to deal with just one insurer when such situations crop up. If you have a base and super top-up plan from different insurers, you may have to deal with two insurers for settlement. Of course, you do have the option of simply shelling out cash beyond the base plan and filing your claim with the second insurer later. 

If you buy the two from different insurers, it is also possible that:

  • The hospital you chose is part of network hospitals for one insurer but not for the other. 
  • The waiting periods and sub-limits of base and super top-up policy are different.

Our take

Overall, a base hospital policy with a super top-up plan does a good job of delivering a substantial hospital cover at an economical cost. How you choose to divide your overall cover between the base plan and the super top-up will depend on whether you have dependents and are likely to make multiple claims in a year. Usually, premiums you save on a base cover plus a super top-up more than make up for forfeiting NCB benefits and recharge benefits from buying a larger base cover. Whenever possible stick to a single insurer for base and super top-up policies. This will help with ease of raising claims.

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