Following the impact of the pandemic on hospitalisation costs and medical inflation of around 8 per cent last year, most policyholders may be considering an increase in sum insured when renewing their health insurance policies. It may be prudent to ensure that one is already getting the most from the existing policies prior to buying additional cover. Health insurance policies contain features which can potentially increase the sum insured by 100-200 per cent above the basic sum insured, not to mention add-ons which can increase it even further. Restoration of cover and no-claim bonus are standard features present in most policies, while top-up and super top-ups are purchasable riders. So, the effective reimbursement can be substantially higher when these features kick-in.

Restoration of cover

This is a feature across policies except in standardised policies such Arogya Sanjeevani and group policies. Basic health insurance reimburses medical expenses incurred in a year up to the sum insured. For the remainder of the year, the sum insured remains depleted by that amount and is replenished from the next year.

Restoration of cover is a feature that replenishes the sum insured after the first claim is made and within that year itself. Most restoration benefits, however, don’t cover related illness. This implies that the follow-on hospitalisations, which are related to the first claim, will not be honoured (not to be confused with post-operative procedures which are different and can be covered subject to the sum insured).

Also, most policies restrict the restoration to only once a year and the amount to the original sum insured or lower. For instance, the most common restoration benefit for an original sum insured of ₹5 lakh would restore the cover up to ₹5 lakh, once in a year and for unrelated illness. Insurance plans from Star Health and Chola MS cover it for any illness (related or unrelated), but the restoration is still once a year. SBI General and Manipal Cigna offer unlimited restorations, with the former extending it to related illness as well. Magma HDI offers up to five restorations or ₹25 lakh in a year for unrelated illness.

No claim bonus

With each year where the policyholder does not claim any reimbursements, the sum insured increases. The general limit of increase is up to 100 per cent, over the sum insured and this can happen over a period of few years (ranging from two to five years or more) depending on the policy. On making a claim, the no claim bonus (NCB) portion does not reset to zero, but is reduced by the same amount as it accrued for the previous year. A common NCB would increase the original sum insured of ₹5 lakh by ₹1 lakh per year to a maximum of additional ₹5 lakh. On making a claim, NCB would get reduced by ₹1 lakh for the year.

Care Health and Bajaj Allianz increase NCB by 60 per cent of the sum insured for the first two years and 10 per cent each for the next three years. This adds up to an additional 150 per cent in five years. The reduction in claim years will also work in the same manner. Manipal Cigna further allows for a maximum NCB accumulation of ₹11 lakh in 20 increments of ₹55,000 and does not impose any reduction on making a claim. Kotak General Insurance also does the same, but for maximum accumulation of ₹5 lakh.

Top-up plans

A top-up or super top-up plans are purchasable riders, which offer additional coverage for medical expenses that breach the original sum insured’s deductible limit. If the sum insured falls short for one single claim, the top-up is triggered. Subject to the sum insured, a top-up is applied on a claim-by-claim basis.

On the other hand, a super-top up is triggered when the sum insured falls short across all the claims made in the year cumulatively. Super-top ups are ideal for supporting numerous smaller claims in a year, while a smaller family without chronic conditions can be supported with a regular top-up.

The pricing for these riders depends on the amount of additional cover purchased. A ₹5-lakh top-up plan would cost anywhere between ₹800 and ₹2,000 per year across insurance providers for a 30-year-old. In comparison, the base sum insured of ₹5 lakh costs annual premium of ₹8,000-16,000 per year.

Careful reading required

The policy pricing is driven by other features and not impacted by restoration benefits or NCB, while top-up/super top-up are add-ons. Applying these options on the otherhand, would involve a careful reading of the policy document. For claims made on policies with significant accumulated NCB, the claim amount must be weighed against the loss from NCB accumulation happening that year. 

Policies with restoration benefit can trigger from partial exhaustion or only on complete exhaustion.

One must understand the interplay of these features too. For instance, your NCB may not be replenished by the restoration benefit. Top-up plans may include NCB amount before triggering. Policyholders can plan for significantly higher coverage on clear understanding of the existing features.