Given that medical expenses are rising faster than inflation, does your health insurance policy cover you enough? If not, a top-up policy may come to your aid as it ensures that you don’t have to spend from your pocket in case of higher claims.

Insurance companies such as Apollo Munich, ICICI Lombard, United India Insurance, and Bajaj Allianz offer top-up policies. While there is a case for you to take a top-up cover, the challenge would be the difficulties associated with claiming from multiple agencies. But even this can be worked around.

How it works

A top-up policy is generally taken as an additional cover.

Some clarity on how top-up insurance works may be necessary. Let us assume that you have basic health cover for Rs 3 lakh and you take a top-up cover for Rs 10 lakh. Now, all top-ups are taken with a ‘threshold’ level or ‘deductable’, only after crossing which the policy claim actually gets triggered. In the above example, the threshold level is Rs 3 lakh. The top-up cover would come into force after the Rs 3 lakh in the threshold level is exhausted. If you have a claim of Rs 5 lakh, the base policy would pay you up to Rs 3 lakh and the top-up policy would pay Rs 2 lakh.

But if you have a claim of say Rs 12 lakh, your base policy will cover you for Rs 3 lakh, the top-up will provide you with Rs 7 lakh only as the total sum insured is only Rs 10 lakh. So you will end up paying Rs 2 lakh from your pocket.

In this regard, a ‘super top-up’ policy, offered by insurers such as United India and HDFC Ergo, would help you overcome the problem. In the above example, you will get the entire Rs 12 lakh reimbursed - Rs 3 lakh from the primary policy and Rs 9 lakh from the super top-up policy. Of course, the premiums would be a tad higher in the case of super top-up cover.

Cheaper cover

Cost wise, a top-up insurance cover may work out a lot cheaper than a regular health policy. For example a basic cover of Rs 2 lakh would cost you anywhere between Rs 2,700 and Rs 5,700, if you are a 35-year-old.

But a top-up policy of Rs 10 lakh with Rs 3 lakh as deductible, would cost Rs 1,400 and Rs 2,800 (including service tax) across insurers such as Bharti AXA, ICICI Lombard and Bajaj Allianz. So, for five times the earlier sum assured, you would pay a lower premium.

So as a part of your overall financial planning process, you must definitely consider taking a top-up cover for a sufficiently large sum. Even if you are covered by your employer, you must take a top-up plan.

Some caveats

There are some points to note on these top-ups. As with a regular policy, there would be a minimum waiting period, exclusion of treatment in case of some ailments and individual limits for specific diseases. Some insurers such as Bajaj Allianz offer immediate cover in case you already have another health policy where you have paid premiums for four years. Apollo Munich offers top-up that makes its cover deductible free from 58-60 years of age.

In case your basic policy and the top-up policy is from two different companies, informing two insurers and getting the claim settled may be cumbersome. But if you can choose a network hospital common to both insurers, the process might be simpler as the insurance company’s desk at the hospital would help you sail through without too many hassles.

Relatively low premiums when compared with regular health policies make top-up insurance affordable.