Top-up and Super Top-up Health Insurance Plans

With quality healthcare expenses rising fast, health insurance premium has become an unavoidable expense. In absence of adequate health cover, a prolonged hospitalization can seriously deplete your finances. Your health cover requirements can increase as your grow older or as your family grows.  Hence, you may have to increase the Sum Insured under your existing health plan. You can enhance your existing health cover by paying an extra premium. Alternatively, you can increase your health insurance coverage by purchasing a top-up or a super top-up health insurance plan. These health plans pay when your medical bill exceeds a certain threshold.

What are top-up and super top-up plans? What is the difference between these two types of plans? What are the benefits? Why are these plans cheaper? Should I purchase the top-up plans from my existing insurer? Should you top-up your personal health insurance plan or employer group health insurance plans? Should you increase Sum Insured under your existing cover or purchase a super top-up plan? These are some of the questions I will answer in this post.

What is a Top-up Health Insurance plan?

Under a Top-up insurance plan, a deductible value is specified.  The insurance plan covers the hospitalization expenses if the medical bill during a single hospitalization/claim exceeds the deductible limit. So, the top-up plan will cover medical expenses that are in excess of the deductible limit in a single claim.

The deductible is the amount of money the insured will have to bear (from his pocket or from personal/group health plan) before the benefits under the policy can be availed.

A few top-up plans can let you club the hospitalization expenses of two or more hospitalizations (during the same policy year) if the hospitalization is for the same illness and within certain number of days of the last discharge.

What is a Super Top Health Insurance plan?

Under a super top-up insurance plan too, there is a deductible limit. The insurance plan covers the hospitalization expenses if the medical bill (or the admissible claim amount) during the entire policy year exceeds the deductible limit.

Super Top-up plan will cover hospitalization expenses that are in excess of the deductible amount during the same policy year.

The deductible limit (or the threshold over which super top-up and top-up plans pay) should ideally be equal to Sum Insured of your existing medical cover (personal or employer group health plan).

What is the difference between Top-up and Super Top-up plan?

Under top-up plans, the insurer will pay only if the medical bill for a single hospitalization exceeds a certain limit (deductible limit)

Under Super top-up plans, the insurer will pay if the hospitalization expenses during the entire year exceed the deductible limit.

Let’s consider the following two cases.

1. Case A: You purchase a regular health plan of Rs 5 lacs and a top-up cover of Rs 5 lacs (with deductible of Rs 5 lacs)
2. Case B: You purchase a regular health plan of Rs 5 lacs and a super top-up cover of Rs 5 lacs (with deductible of Rs 5 lacs)

Let’s consider two scenarios

Scenario 1: You get hospitalized once and run a medical bill of Rs 8 lacs

Scenario 2: You get hospitalized twice and run two medical bills of Rs 4 lacs each during the policy year

You can see, under Scenario 2, top-up plan does not pay anything since the  threshold (deductible) of Rs 5 lacs is not exceed in either of the hospitalization.  Super top-up plan pays Rs 3 lacs for second claim since the deductible limit is for the entire policy year (and not single hospitalization).

It is quite clear that the super top-up plans offer better coverage than top-up plans and hence have higher premium than top-up plans.

Why are Super Top-up plans and Top-up plans cheap?

The probability of your running a medical bill of Rs 10 lacs is lower than running a medical bill of Rs 5 lacs. With these plans, the insurers take a bet that your hospitalization bill will not exceed the deductible limit in a single claim or policy year (as the case may be).

Higher the deductible, lower the premium.

That’s why you can get top-up and super top-up plans at cheap prices.

Since top-up plans are even more restrictive than super top-up plans, top-up plans are cheaper than super top-up plans.

Why should you purchase a Top-up or a Super Top-up plan?

1. To supplement your employer group health cover

Hence, it is advised that you purchase a personal health insurance plan. In case you find e regular health insurance plan too expensive, you can purchase a super top-up plan to get a higher coverage. The deductible under the super top-up plan should be the Sum Insured under the employer cover. Top-up plan or super top-up plan will remain active even when you shift between jobs.

If your employer cover is Rs 5 lacs, you can purchase a super top-up plan of Rs 5 lacs (with a deductible of Rs 5 lacs). Hence your hospitalization expenses up to Rs 5 lacs will be covered by your employer insurance. Expenses in excess of Rs 5 lacs and up to Rs 10 lacs can be covered by super top-up plan.

2. To supplement your personal health cover

Self-employed or retired people do not have the comfort of employer health cover and have to purchase personal health covers. Even otherwise, many who have group health cover from their employers purchase personal health insurance plans.  If you want to increase coverage under the personal plans, you can either enhance Sum Insured under the existing plan or purchase a top-up or super top-up plan to get higher coverage. Super top-up plans are a cheaper alternative. 

3. To limit your medical bill liability

There is no requirement to have a basic (regular) health insurance plan before you purchase a top-up or a super top-up health plan.  Those who do want to rely on their savings for medical treatment but still want to limit their liability can purchase super top-up plans. For instance, you do not purchase a regular plan but purchase a super top-up plan with a deductible of Rs 2 lacs.  Any hospitalization expense up to Rs 2 lacs will have to be paid from your pocket. Amount in excess of Rs 2 lacs will be covered by Super top-up plan. You save on premium for regular health plan but run risk of paying from your pocket up to Rs 2 lacs.

Some people can find it difficult to purchase regular health plan because of existing ailment or old age. The premium for such people can be quite high or the insurance company can even refuse to issue the policy outright. However, insurance company may take a lenient view if you purchase a super top-up plan since its liability will kick in only after a certain threshold. Therefore, such people can opt for top-up or super top-up plans to limit their medical liability at a low cost.

Should I top-up my personal health insurance plan or my employer health plan?

As mentioned above, the deductible limit of top-up or super top-up plans should ideally be Sum Insured of your existing health cover. However, you may have two health plans (personal and employer group cover). Which Sum Insured should you use as deductible for the top-up plans?

Let’s consider the following cases

1. Super top-up plans kick in only after the medical bills exceed a particular threshold (deductible limit). Who do you think should control this limit? Let’s consider your current employer offers you a cover of Rs 5 lacs. You purchase a super top-up cover with deductible of Rs 5 lacs. You switch your job a few months later. Your new employer provides cover of only Rs 3 lacs. What do you do? If you get hospitalized and run a bill of Rs 5 lacs, you will have to foot Rs 2 lacs yourself.
2. Please understand the nature of coverage offered by your employer plan and super top-up plan can be different. Let’s consider you run a bill of Rs 8 lacs, but your employer health plan considers only Rs 3 lacs as the admissible claim. This can be due to any sub-limits in your employer group health plan or any other exclusion. In such a case, your super top-up plan will kick in only for the expenses in excess of Rs 5 lacs. Hence, the insurer will pay only Rs 3 lacs under the super top-up plan. You will have to pay Rs 2 lacs from your pocket.  You didn’t plan for this, did you?

That’s why it is better to top-up or super top-up your personal health insurance plan (and not employer group health plan). You have greater control in selection of your personal health insurance plan.

Points to Note

1. Top-up (or super top-up covers) are available for both individual and family floater policies.
2. It is not necessary to purchase top-up or super top-up plan from your existing insurer. For instance, you may have purchased a regular health plan from Max Bupa; you can purchase top-up cover from Apollo Munich. However, I feel the claim process is likely to be easier if you have both the plans from the same insurer.
3. Top-up (or super top-up) plans are likely to be reimbursement plans (and not cashless).
4. Premium for Top-up and Super Top-up plan is eligible for deduction under Section 80D (same as for regular health insurance premium).
5. Super top-up plans or top-up plans typically do not offer any no-claims bonus (renewal benefits).
6. A few plans may allow you to convert your super top-up plans into regular health plans at a specific age or retirement or after a certain period. After retirement, there won’t be employer cover to rely upon. If you have a super top-up plan, you can convert your super top-up plan into a regular health plan i.e. the deductible limit will be dropped. Premium will increase, of course. Some plans can even offer continuity benefits (waiting period etc).
7. The policy years of employer health insurance plan (or personal health insurance plan) and super top-up plan can be different. For instance, let’s assume the policy year personal health plan (Rs 5 lacs) is January 1 to December 31. The policy year for super top-up plan (Rs 5 lacs with a deductible of Rs 5 lacs) is July 1 to June 30. Suppose you get hospitalized in April and run a medical bill of Rs 3 lacs. Your regular plan will cover the expenses. In August, you get hospitalized again and run a medical bill of Rs 5 lacs. Your regular plan will pay only Rs 2 lacs (as Rs 3 lacs have been paid in an earlier claim). Super top-up plan will not kick in since the total bill under its policy year (July 1- June 30) has not exceeded Rs 5 lacs. So, you will have to pay Rs 3 lacs from own pocket.  Keep the policy years of the two plans close.
8. Do consider the coverage offered by super top-up plans too. It is not just that your hospitalization bill needs to exceed Rs 5 lacs. The claim amount admissible under super top- up plan must exceed Rs 5 lacs before the insurer thinks about paying. Let’s consider an example. You run a hospitalization bull of Rs 8 lacs during the policy year. Employer plan (or regular plan) reimburses Rs 5 lacs. However, under the super top-up plan, the admissible claim (before applying deductible) is only Rs 6 lacs. Hence, in such case, the insurer will only pay Rs 1 lac. Read the terms and conditions properly.

Should I enhance cover under the existing plan or purchase a top-up cover?

You know that you need higher cover. There are two ways to do it. You can enhance Sum Insured under the existing plan or purchase a super top-up health insurance plan.

I prefer to increase the Sum Insured under the regular health cover. Though it comes at an additional cost, it will save you hassles of having to claim from two plans. Moreover, Super top-up plans, by their inherent nature, are not likely to be cashless. So, you will have to first pay from your pocket and then get the amount reimbursed.

What about the premium?

Consider two scenarios.

Scenario 1:  Purchase a regular health plan from Company A with Sum Insured of Rs 10 lacs.

Scenario 2: Purchase the same regular health plan from Insurer A with Sum Insured of Rs 5 Lacs. Additionally, purchase a super top-up plan of Rs 5 lacs with a deductible of Rs 5 lacs from A.

You can see the liability of insurer A is same in both cases (assuming coverage offered by the insurer is same in the regular and super top-up plan).  However, when I checked the premium for a regular health plan (Rs 10 lacs) and a combination of regular plan (Rs 5 lacs) and super top-up plan (Rs 5 lacs with a deductible of Rs 5 lacs), the combination was cheaper.

Illustration

I have considered Optima Restore and Optima Super for an individual aged 30 years. Optima Restore is a regular health insurance plan from Apollo Munich. Optima Super is a super top-up health plan from Apollo Munich.

For the same coverage, the premium of the combination is lower.

What can be the reason for this discrepancy?

I tried to find out the reason. The only thing I could think of was difference in coverage of regular and super top-up plans. A few people I talked to pointed that the insurer prices the super top-up plan and regular plan separately (and does not consider the total risk) and that causes the difference. I was further told that super-top-up plans do not offer no-claim bonus. Typically, in case of regular plans, your sum insured is enhanced by a certain percentage after a no-claim policy year. Let’s say the insurer increase the cover by 10% after no-claim policy year. So, after 1 year, your cover under plan of Rs 10 lacs will become Rs. 11 lacs. However, under the combination, the cover will only be Rs 10.5 lacs (Rs 5.5 lacs under the regular plan and Rs 5 lacs under super top-up plan). Probably, that’s what causes the difference in premium.

When should you purchase a Top-up plan?

We have discussed the utility of super top-up in an insurance portfolio. However, where do top-up plans figure? Top-up plans pay only in case when claim amount exceeds deductible amount in a single hospitalization.

Some top-up plans allow hospitalization expenses to be clubbed when the hospitalization is for the same illness.  Apollo Munich Optima Plus, a top-up plan, allows clubbing of the expenses if the hospitalization is for the same illness and within 45 days of last discharge. Otherwise, it is considered a fresh hospitalization. So, this is one parameter you need to watch out for.

Though I have no statistics to back my argument, you are more likely to get hospitalized for the same illness more than once rather than get hospitalized for two different illnesses. Therefore, top-up plans can add some value to your portfolio.

Optima Plus (Rs 5 lacs with deductible of Rs 5 lacs) would cost Rs 800. Optima Super (super top up) for the same coverage costs Rs 1,620.

I prefer super top-up plans over top-up plans. Though the premium is a bit higher, super top-up plans provide broader coverage.

PersonalFinancePlan Take

There is no doubt super top-up and top-up health insurance plans can add value to your insurance portfolio at a low price.

However, just like you need to do while purchasing regular health insurance plans, do read the terms and conditions properly. You need to understand the extent of coverage for top-up and super top-up plans too.  Do not just go by names. Plan names can be misleading.  An insurance plan named as a top-up plan can be a super top up plan or vice-versa. Read the terms and conditions carefully to understand the type of plan you are buying.

Though it is not mandatory to purchase regular and super top-up plans from the same insurer, the claims process is likely to be easier if both the plans are from the same insurer.

For the reasons discussed earlier, topping up your employer group health cover can be tricky. If required, top up your personal health cover.

Personally, I prefer increasing the Sum Insured under the regular plan (rather than purchasing a super top-up plan).  I do not want to file for claim under two different health plans. Super top-up plans are unlikely to be cashless either. So, I will have to pay from my pocket and get the amount reimbursed later. Though it is an expensive option, it can save me a lot of headache. It is a personal choice.

Here is what you should do:

1. Purchase a personal health insurance plan (in addition to employer group health insurance plan)
2. When needed, enhance Sum Insured under the existing plan. If the premium is not affordable, use super top-up plans to increase coverage.

What would you do?

Image Credit: DLG Images, 2015. Modified. The original image and information about usage rights can be downloaded from Flickr/DirectLine