Cheap Super Top-Ups? Here’s Why They Might Be Worthless

Deductible health insurance products focus on particular segments of consumers, namely those consumers who have an existing base health policy and are looking to expand their coverage, members of group Mediclaim plans, and young and healthy consumers who wish to protect against unforeseen, large financial risks as they relate to hospitalization (from an accident or critical illness) while accepting responsibility for small medical costs.

“That being said, there are consumers who feel health insurance products are too expensive and are willing to purchase top-up or even super top-up plans, regardless of whether they are fully aware of the additional risk exposure due to a deductible,” says Dinesh Mosamkar, senior VP - consumer underwriting, TATA AIG General Insurance.

Consequently, consumers must be aware of the significance of the deductible prior to and as a precursor to the purchase of these products, to ensure they are aware of the relevance of the deductible and the implications to their claims prior to purchase.

Super Top-Ups Can Be Useless If Your Deductible Exceeds Base Coverage

"A lot of consumers simply buy super top-ups because the price looks attractive, but don’t realize how a deductible works. If the deductible exceeds the sum insured of the base policy, the super top-up is essentially useless,” says Arun Ramamurthy, co-founder, Staywell.Health.

For example, if you have a base (original) policy that covers Rs 5 lakh but buy a super top-up of Rs 7 lakh deductible, the insurance company will expect you to pay the first Rs 7 lakh (deductible) charge, not the super top-up. In most hospitalizations, your super top-up benefit will never be available. It renders the whole top-up process pointless.

“Much of this happens and is classified as mis-selling, or lack of understanding of the super top-up process. People buy these higher coverages at cheap rates, not realizing the deductible framework renders them ineffective,” says Ramamurthy.

How To Choose A Deductible 

The deductible for the top-up should be equal to or lower than the limit of the base policy cover. This twofold protection ensures that. The base policy pays out to its limit. The second you hit that limit, the super top-up kicks in without delay.

For example, let's say that the base policy is Rs 5 lakh and the deductible is Rs 5 lakh.

Then, even if the bill is Rs 6 lakh or Rs 6 lakh, the top-up starts paying immediately, and on the amount after the first Rs 5 lakh is reimbursed.

If a person does not have a base policy, then they should choose whichever deductible they are able to afford out of pocket, typically between Rs 2 lakh to Rs 3 lakh based on the individual's affordability.