Should I take top-up policy or super top-up?

Super top-up is better, as the limit is reset on every claim. While for top-up, it's per policy year

Introduction ✨

Before we get to the answer for this, we need to define and establish common understanding around some domain specific terms.

A Base Policy, which could either be a group, an individual, or a family floater policy, covers you and/or your family members up to the Sum Insured.

This is for any hospitalizations; for a minimum period of 24 consecutive in-patient care hours, except for specified procedures/treatments where such admission could be for a period of less than 24 consecutive hours.

This base policy might have restrictions on Room Rent (all major hospital expenses are linked to this parameter, as discussed before) and ICU charges; require you to co-pay a specified percentage of the admissible claim amount and have other restrictions/exclusions under the policy.

Given all other conditions like your age, any pre-existing illnesses, number of family members being insured being the same, your base policy premium will increase with every increase in the sum insured. Hence a ₹2,500,000 (25L INR) sum insured policy will have a higher premium than a ₹1,500,000 (15L INR) sum insured policy.

Is my base policy enough? 🤔

Cost price inflation of medical services and medicines (closer to 10%-15% per annum) and lifestyle diseases can make a base policy of 25L inadequate in the next 5 years, since the time of subscribing in the policy.

Any new policy will also have a waiting period for pre-existing illnesses (PED’s) along with higher premiums due to the PED’s. If you want to future-proof your medical expenses, the base policy alone will not be enough.

The option you then have is to buy an additional top-up or super top-up policy. Both these policies are based on a clause called a deductible.

What is a deductible? 🌵

As per IRDAI’s guidelines on standardization in health insurance:

Deductible means a cost sharing requirement under a health insurance policy that provides that the insurer will not be liable for a specified rupee amount in case of indemnity policies and for a specified number of days/hours in case of hospital cash policies which will apply before any benefits are payable by the insurer.

When you buy a top-up or super top-up policy you must choose a deductible - the maximum cost you need to bear when making claim.

Assume you are buying this policy with a deductible of ₹500,000 (5L INR). What it means is that the first 5L INR of any eligible claim will first be paid by the insured either through a separate base policy or out-of-pocket.

Top-up vs Super Top-up? ☯️

In case of a top-up the deductible is applicable for each hospitalization, whereas in case of a super top-up the deductible is cumulative for the policy year.

Which one do I buy? 💰

Assuming you already own a base policy and are choosing between a top-up vs super top-up, it’s usually recommended you buy the super top-up.

The higher the deductible that you choose, lower will be the premium for the super top-up policy.

Ideally your super top-up policy should have the same renewal date as your base policy. This ensures that both policies overlap each other 100% and the benefits of having these two policies are maximized.

Super top-up policies are available for sum insured of up to 1 crore with some insurers.

Why is the premium low for Super top-ups? 🐤

Insurers can offer super top-ups at a cheaper rate compared to base policy. This is because of much lower probability of higher expenses, that’d require you to use your super top-up policy claim options.

Statistically, it's more likely that your hospitalization costs would be within the deductible limit of super top-up policy. Hence, insurers can afford to offer lower premium.