Should you increase base cover, add Rider to go for Top up plan? Make informed choice…..

If you are above 40 years of age, or even lesser, you might have realized the need to increase your medical cover, either because you have gone through a medical emergency and realized that cost of medical treatment has gone through roof, and its costs a lot to get a reasonable quality medical treatment, or have learnt from the experience of your friends or relatives. It could simply be the case that you took your medical insurance sometime back and now wish to increase the cover to ensure its adequacy in case of any eventuality.

What even be your reason, but before you embark upon the mission its good to get some understanding of different options and how does each one work. It’s a fact, buying insurance in general and health insurance in particular is a complex task, because of the way its worded and presented.

What are the options?

There are basically two options to choose from, one is to get your basic insurance covered increased, e.g., increase a Rs.5L cover to Rs.10L cover, pay increased premium and follow the rules of exclusion etc.

The other choice is to go for Top Up Plan, that is over a base cover of current value Rs.5L, purchase a top up plan for Rs.5L.

What’s the difference and what are benefits, or for that matter even disadvantages.

In order to understand the difference in two approaches, one has to know the definition of these two.

So, does this work?

Base cover increase is no brainer, simply put, it’s just straight increase in the overall insurance cover, comes with increased premium and associated conditions. Most important being, the pre-existing disease exclusion, it kicks in for increased cover part for the period as defined in policy conditions. With increased insurance, in case of hospitalization, if total bill comes to say Rs.6.5L, one is able to claim the entire amount, subject to terms and conditions of the policy.

While in case of Top Up Plan, one has to view it as two components of a policy, one component, the base cover, say part A, is used to claim any hospitalization expenses up to Rs. 5L, subject to the terms of policy. The Top Up part, say part B, kicks in only if total expenses are more than Rs. 5L, say 6.5L. In such a condition, first claim up to 5L is filed using base cover plan, part A, and remaining 1.5L is claimed through Top Up plan, part B.

The Top Up plans come with the condition that in case of any claim initial amount, up to Rs.5L in our example, will not be covered through it and hence these plans have significantly lower premium.

So, when you view two together, the over all cover limit is still 10L, but the premium is lower than one single Ra.10L insurance plan.

Its also important to understand that Top Up plans are per incidence based plans, i.e. these pay for claims above base cover claim, per incidence basis, and do not take care of claim, if base cover gets exhausted in any given year, on account of multiple claims with in the same year. In such cases, what’s of use is Super Top Up Plan, and we will deal with this on in our next post.