Two of the most significant risks that individuals face when it comes to financial planning are the risk of death and the risk of hospitalization. It is important to have these risks covered in order to protect oneself and one’s family from financial hardship. There are various insurance policies available that can provide coverage for these risks, such as life insurance and health insurance. It is important to carefully consider one’s needs and budget when choosing a policy, and to make sure that the policy is sufficient to cover any potential risks.
The risk of death can be covered with a term life insurance policy, which is a type of insurance that pays a designated beneficiary a specific amount of money upon the insured individual’s death. Term life insurance is a cost-effective way to provide financial protection for one’s family in the event of an unexpected death.
The risk of hospitalization can be covered with a health insurance policy, which helps to pay for the medical expenses associated with hospital stays, surgeries, and other types of medical treatment. It is important to have a comprehensive health insurance policy to ensure that you and your family have access to the medical care you need, and to protect yourselves from the financial burden of high medical bills. It is advisable to carefully research and compare different health insurance plans to find one that meets your needs and budget.
Health insurance is often viewed as a cost and may be neglected until the need for hospitalization arises. In addition, individuals who are covered by a corporate health insurance plan through their employer may overlook the need for personal health insurance.
Another common reason for not purchasing health insurance is the perceived high cost of the premiums. However, there are ways to increase coverage at a lower cost. One option is to consider purchasing additional insurance policies that can complement and enhance the coverage provided by a basic health insurance plan. In this article, we will discuss two lesser-known insurance policies that can help you boost your coverage at a reasonable price.
Top-up and super top-up insurance policies can act as a booster to your base health insurance plan, helping you to increase your sum insured at a reasonable cost. These policies come with a deductible, which is the amount that must be paid before the top-up or super top-up coverage becomes effective. The deductible is usually equal to the amount of coverage provided by the base insurance plan, so once the base plan’s coverage has been exhausted (or the deductible has been met), the top-up or super top-up coverage kicks in. You can purchase a top-up or super top-up policy from either your existing health insurance company or from a different provider.
It is worth noting that you do not necessarily need to have a base insurance plan in order to purchase a top-up or super top-up policy. Instead, you can treat the insurance provided by your employer as your base coverage and purchase a top-up or super top-up policy on top of that.
For example, if your employer provides a health insurance coverage of Rs. 5 lakhs, you can purchase a top-up or super top-up policy by setting the deductible at this amount. This means that in the event of a claim, you would first need to exhaust the Rs. 5 lakhs of coverage provided by your employer before the top-up or super top-up coverage becomes active.
Top-up and super top-up policies differ in the way that their deductible is calculated. A top-up policy has a deductible that is calculated based on each hospitalization. The top-up coverage becomes active and begins paying out only if the expenses for a single hospitalization exceed the deductible limit. For example, if Mr. A has a base policy with coverage of Rs. 10 lakhs and purchases a top-up policy with coverage of Rs. 40 lakhs and a deductible of Rs. 10 lakhs, the top-up coverage would not become active until the expenses for a single hospitalization exceeded Rs. 10 lakhs.
Following are the scenarios:
For example, if Mr. A had purchased a super top-up policy instead of a top-up policy, the deductible would be calculated based on the total sum of hospitalization expenses incurred over the course of the entire year. Once the total expenses paid across all admissions exceeded the deductible, the super top-up coverage would become active.
Continuing with the example above, if Mr. A had a base policy with coverage of Rs. 10 lakhs and a super top-up policy with coverage of Rs. 40 lakhs and a deductible of Rs. 10 lakhs, the coverage and payments would be as follows:
Hospitalization 1: Hospitalization bill is Rs. 6 lakhs
In this case, the base policy would cover the entire bill and the super top-up would not be triggered.
Hospitalization 2: Hospitalization bill is Rs. 6 lakhs
In this case, the base policy would cover Rs. 4 lakhs and Mr. A would have to pay Rs. 2 lakhs out of pocket, since the single hospitalization bill has not exceeded the base policy’s coverage limit of Rs. 10 lakhs.
Hospitalization 3: Hospitalization bill is Rs. 12 lakhs
In this case, the base policy’s coverage has been exhausted, so Mr. A would have to pay the first Rs. 10 lakhs out of pocket. The total hospitalization expenses for the year are now Rs. 24 lakhs, which exceeds the deductible of Rs. 10 lakhs, so the super top-up policy becomes active and covers the remaining Rs. 2 lakhs of the bill.
Following are the scenarios:
Hospitalization 1: Hospitalization bill is Rs. 6 lakhs
In this case, the base policy would cover the entire bill and the super top-up would not be triggered.
Hospitalization 2: Hospitalization bill is Rs. 6 lakhs
In this case, the base policy would cover Rs. 4 lakhs and the super top-up would cover the remaining Rs. 2 lakhs, since the total hospitalization expenses for the year have now exceeded the deductible of Rs. 10 lakhs.
Hospitalization 3: Hospitalization bill is Rs. 12 lakhs
In this case, the super top-up would cover the entire bill of Rs. 12 lakhs.
It should be clear by now that a super top-up policy is a more comprehensive product that can cover multiple smaller bills if hospitalization occurs multiple times in a single year. Super top-ups typically have a higher premium, but they provide coverage for all bills once the base policy’s coverage has been exhausted. In contrast, top-up policies only become active once the expenses for a single hospitalization exceed the deductible.
It is advisable to consult with an insurance advisor to determine which type of policy is the most suitable for your needs before making a purchase.