What are Top-up Health Insurance Plans, and how can these be beneficial,

 

Top-up health insurance plans are a type of insurance policy that provides additional coverage beyond the coverage limit of an existing health insurance policy. These policies come into effect once the coverage limit of the primary health insurance policy has been exhausted.

As a certified financial planner, I recommend considering top-up health insurance plans as they offer the following benefits:

Cost-effective: Top-up health insurance plans are generally more cost-effective than buying a higher-sum insured health insurance policy. This allows policyholders to purchase additional coverage at a lower premium.

Additional coverage: Top-up health insurance plans provide additional coverage to policyholders, which helps them to increase their financial protection against medical expenses.

No waiting period: Unlike traditional health insurance policies, top-up health insurance plans do not have any waiting period. The policyholder can avail of the benefits of the policy as soon as it is purchased.

Tax benefits: Policyholders can claim tax deductions on the premium paid for a top-up health insurance policy under Section 80D of the Income Tax Act.

To understand the benefits of a top-up health insurance plan, let's take an example. Suppose you have a primary health insurance policy with a coverage limit of ₹5,00,000, and you have purchased a top-up health insurance plan with a coverage limit of ₹15,00,000, with a deductible of ₹5,00,000. In case of a medical emergency, if the medical expenses are ₹7,00,000, the primary health insurance policy will cover ₹5,00,000, and the remaining ₹2,00,000 will be paid out of pocket. However, if you have a top-up health insurance policy, the deductible amount of ₹5,00,000 will be paid by the primary insurance policy, and the remaining ₹2,00,000 will be paid by the top-up health insurance policy.

In this example, the policyholder has increased their financial protection against medical expenses by purchasing a top-up health insurance policy, which helps them avoid paying a significant amount of money out of pocket. Additionally, the policyholder can claim tax deductions on the premium paid for the top-up health insurance policy, which further reduces the overall cost of the policy.

As a certified financial planner, I would recommend that policyholders evaluate their healthcare needs and expenses to determine whether a top-up health insurance plan is suitable for them. If they have a primary health insurance policy with a lower sum insured, they can consider purchasing a top-up health insurance policy to increase their financial protection against medical expenses. It is always advisable to compare the different policies and coverage benefits provided by various insurance providers before making a purchase decision.

Raja Bhattacharjee

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This blog is purely for educational purposes and not to be treated as personal advice.