While traditionally, Indians were known to use their savings for medical emergencies, the rising costs of healthcare started eroding their wealth. Over time, people started understanding the importance of health insurance. With an increase in lifestyle-related diseases, people increasingly need more medical attention than before. Also, medical inflation rates are high resulting in exorbitant medical bills.

Insurers offer a range of options in medical insurance plans to help people manage specific medical conditions effectively. For example, when you buy critical illness insurance, the insurer pays a predetermined amount to you on being diagnosed with the covered critical illness. This can be beneficial for people with a family history of certain diseases.

Despite having the best health insurance policy, there can be situations where the sum assured falls short of covering the current medical bills. This is where health insurance top-up plans step in. When you buy health insurance with a top-up, you can access a higher sum assured if you exhaust your base amount.

In this article, we will talk about health insurance with top-up and understand if buying it is a reliable way to cover future medical costs.

How Does a Top-up Plan Work?

You can opt for a top-up plan if you have a health insurance plan and want to increase coverage. This helps you cover an additional amount that your hospital bills might need over and above your base health insurance coverage. Top-up plans are not linked to your base health insurance policy.

Here is an example —

Ravi has an individual health insurance policy with a maximum sum assured of ₹10 lakhs. Since he is concerned with the rising costs of medical care, he decides to buy a top-up plan that offers additional coverage of ₹5 lakhs. A couple of months later, he gets hospitalised, and the total bill is ₹13 lakhs. In this case, his base health plan will cover the bills up to ₹10 lakhs, and the top-up plan will kick in to cover the remaining ₹3 lakhs bill amount.

Is a Top-up Plan a Reliable Way To Manage Future Medical Costs

When you buy a health insurance policy, you opt for a sum assured based on the existing costs of medical treatments and factor in some increase in prices over time. However, medical inflation rates are high, and it is impossible to predict the right amount of treatment. Hence, many people opt for a top-up plan to prepare themselves for medical costs in the future. Here are some pros and cons of top-up plans that can help you decide if they can work for you:

Pros of Top-up Health Insurance Plans

• A top-up plan allows you to increase the sum assured affordably. Buying a top-up plan is cheaper than buying a new health insurance policy with a higher sum assured.
• These plans allow you to be prepared for unexpected hospital costs that go beyond your base coverage.
• These plans are usually issued based on your base plan and do not require additional health check-ups.
• You can buy a health insurance plan and a top-up plan from two different insurers.
• The premium paid towards top-up plans can be claimed for tax deduction under Section 80D of the Income Tax Act, 1961.

Cons of Top-up Health Insurance Plans

• These plans are usually helpful in single-incidence hospitalisations where you exhaust the basic plan.
• While a health insurance provider offers a discount on premiums or increases the sum assured on renewal if you do not file a claim (No Claim Bonus), this benefit is not offered with a top-up plan.
• There is a waiting period clause in top-up plans, after which they are activated.
• top-up plans cover only the standard conditions as per the base policy.

Summing Up

Sometimes, when one gets admitted to a hospital for a certain medical treatment, things can get complicated and increase the time they would have to be hospitalised. This increases medical bills. Predicting the outcome of any treatment is not possible, and if the problem increases, the bills increase too. With a fixed sum assured, there can be times when you exhaust the available limit.

In such cases, you have to bear the expenses without a policy covering them. When you buy a top-up plan, you can be prepared for such bill increases. However, you would need a strong base policy for the top-up plan to be effective.