Is buying a top-up health insurance plan a dependable solution for all your future health expenses?
A good combination of a base plan and a top-up can help you optimise the higher coverage and your premium expense. “As super top-up plans come with a deductible (a threshold amount till which it doesn’t start coverage) its rates are much cheaper than a base plan. Higher the deductible, lower the rate," says Goswami.
Overall, the total coverage target should be made after considering not only current expenses, but also the likely expenses in future. “The first consideration is to have an optimal overall sum insured.It makes economic sense to have the optimal cover as a combination of a base plan and a super top-up plan. As an illustrative example, a Rs 10 lakh base plan costs around Rs 16,000 for a 35-year-old, and a super top-up for Rs 50 lakh-1 crore with a Rs 10 lakh deductible will cost Rs 1,000 to Rs 5, ..Depending on the place of residence, you can tweak your coverage. “As a thumb rule, a Rs 20 lakh cover should meet the usual lifestyle medical exigencies in metro cities. In situations where the treatment cost may skyrocket, a super top-up plan will serve the purpose," adds Goswami.
Given the high inflation, especially in healthcare, many people who have a basic health insurance cover often consider buying a top-up plan. This is intended to ensure adequate financial protection even when medical expenses rise. However, will it work according to your plan? Not necessarily.
Let us use the example of a base policy with a sum insured of Rs 5 lakh and a Rs 10 lakh top-up, which takes the total coverage to Rs 15 lakh. The daily room rent limit covered by a good number of policies is around 1% of the sum insured. So, in this case, buying a top-up policy doesn’t mean that your daily room rental limit will automatically go up from Rs 5,000 in the base plan to Rs 15,000 after the top up.
“A top-up policy increases your coverage as a whole. You will be able to avail of the benefits according to the available limits in your base plan. In case of an expense, your base plan gets exhausted first,” says Naval Goel, Founder and CEO of PolicyX.Com, an online insurance seller.
This means you will get daily room rent coverage up to Rs 5,000 till the base plan coverage is exhausted. After that, the top-up will kick in and the room rent coverage will go up to Rs 10,000.
Nayan Goswami, Head-General Insurance, Sana Insurance Brokers, explains that a top-up or a super top-up enhances the overall cover but does not change the base plan’s offering.
Sharing-room won’t be converted to private room
If your base plan mandates that you will only get a shared room, you cannot get a private room even after taking a top-up plan. “If a person is eligible only for a sharing room in the base policy, then the cover will be provided according to the policy terms and conditions,” says John Mayne, Executive Director, Coverfox Group.
However, if you had chosen a private room at the time of hospital admission despite your basic policy covering only a shared room, then you would only have to pay for the difference in room rent before the top-up kicks in. “The room rent limit is a percentage of the base policy,” says Goel. “It doesn’t go up with the aggregate of the base plus top-up plan. So, the policyholder can opt for a more expensive room, but the additional cost will have to be borne by the individual.”
Why is this daily room coverage so important?When it comes to hospital stay, a good part of the expense is directly linked to room rent. If you have lower room rent, then your related expenses would be less but if you opt for higher room rent than what your policy offers then these tied expenses will also go up proportionately. As, your base policy reimbursement will remain limited, you would have to pay the difference from your pocket. The longer the hospital stay, the bigger your out-of-pocket expense.With time, you will pay moreWith time the expenses are bound to go up due to inflation. Let us assume a single room in a private hospital typically costs Rs 5,000 a day today. If we take an average inflation of 7%, it will cost Rs 13,795 after 15 years and Rs 27,137 after 25 years.Typically, many comprehensive policies offer daily room rent coverage at 1% of sum insured. If your sum insured is Rs 4 lakh, your daily expenses that will be reimbursed would be only Rs 4,000. So, you would end up paying Rs 9,795 and Rs 23137 daily after 15 years and 25 years respectively from your own pocket till the top-up plan with higher coverage kicks in.
The only option left for you to save cost would be to opt for a less costly room such as a shared room. Else, if you go for a higher category of room, then not only your room rent goes up but also your total expenses since a good part of other cost is proportional to the room rent.
“Even if a customer opts for a room with a higher rent, the claim will be settled based on the room rent mentioned in the policy. The extra cost of the room will have to be paid from the person’s pocket,” says Mayne.
Even if the top-plan covers a more expensive room, a patient can avail of it only after the base plan is exhausted. “A customer has to check the policy wordings in order to know the room rent coverage in the top-up plan. There may or may not be a room rent limit depending on the plan,” says Mayne.Will the implication be different in case of a super top up plan?
Things won’t change much even when you buy a super top-up plan. “A super top-up plan does not necessarily increase the room rent coverage. It adds to the sum that you have insured for yourself,” says Goel.
Just like top-up plans, the coverage of a super top-up plan will kick in only when the base plan is exhausted. "The principle of a super top-up is that you are insured for an amount up to the stipulated sum insured after you have already spent a threshold amount (deductible amount). This deductible can be paid from your base plan (or from your own sources) and you are covered for expenses under the top-up or super top-up beyond the deductible amount," says Goswami.
He points out that a super top-up plan’s features are independent and do not mirror or enhance those of the base plan.
Should you go for higher basic coverage or a top-up plan?
Going for a top-up or super top-up plan may not be the ultimate solution for all your worries related to medical expenses. If the base cover of your family floater health insurance plan offers a low sum insured, such as Rs 1-3 lakh, then a top-up or super top-up plan may become your lifeline a few years down the line. So, it would make sense to ensure that all types of coverage for various diseases — including room rent expenses — is sufficient for your old-age requirement as well.
If you have a base plan with a sum insured lower than Rs 5 lakh, you should review your base plan first. “It is definitely better to opt for a higher basic plan, though it may have higher premiums than a top-up, as it comes with more inclusive coverage and more features and not just a higher sum assured,” says Goel.
However, if you have a significant base cover of Rs 5-10 lakh, then you need to be very cautious about deciding between getting a bigger top-up or super top-up plan with lower deducible and raising your base cover to a level where disease and room rent coverage will remain adequate. If you think that you have a good base plan coverage, go for a top-up plan. “I would recommend going for a top-up policy as the premium is comparatively low,” says Mayne.
