When we first purchase health and term insurance, we carefully assess our needs and budget to determine the appropriate coverage amount. However, life throws curveballs, and what seemed like adequate coverage at one time may no longer be sufficient. Medical costs rise due to inflation, our family duties may increase, and our term insurance payout may not be sufficient to protect our loved one’s future. This is where topping up your health and term insurance comes in.

What are top-up health insurance policies and why do you need them?

A top-up health insurance plan provides additional medical coverage for policyholders who already have an existing health insurance policy. It essentially supplements an existing health insurance policy by covering medical expenses that exceed the sum insured under the standard health insurance policy. It helps to increase your financial security against various health-related difficulties while also increasing the amount insured.

In other words, assume you have a health insurance plan with a maximum sum insured of Rs. 5 lakhs and purchase a top-up plan for Rs. 3 lakhs. If you are hospitalized, your base health plan will cover medical fees up to Rs. 5 lakhs, and the top-up plan will take effect after your base plan’s maximum sum is reached.

Reasons and Benefits to Consider Increasing Your Health Insurance Coverage

If your health insurance plan does not give adequate coverage to cover high hospitalization costs in current times, you may need to get two policies or increase the sum insured.

Increased Coverage: A top-up health insurance plan helps policyholder increase their medical coverage so that they may pay for unexpected medical bills even after the sum insured in their base policy has been exhausted.

Comes with a low premium and helps you avoid buying new health insurance coverage: Top-up health insurance plans are designed to provide the most comprehensive range of coverage at a lower cost, so you will not need to purchase new health insurance. 

Comes with tax benefits: You may be eligible for tax savings on the top-up health insurance plans premiums you paid under Section 80D of the Income Tax Act of 1961. The cost of insurance for yourself, your spouse, and your dependent children may reduce your tax liability by up to INR 25,000. Senior citizens may be eligible for a higher deduction limit, and if you are over the age of 60, you may claim up to INR 50,000.

Coverage for pre-existing conditions: In general, health insurance plans do not cover pre-existing conditions. However, you may complement your base plan with a top-up that provides the same coverage. This is especially advantageous if you have a family history of certain diseases, such as hypertension or diabetes.

Helps you tackle growing medical inflation: Medical inflation in India is expanding at an alarming rate of over 20%, compared to 8-9% in previous years. Thus, investing in top-up health insurance plans coverage can help you effectively combat inflation.

How to increase your coverage with a term insurance policy?

When you purchase a term insurance policy, you intend to leave a significant amount of money for your family in case you die before meeting all of your financial commitments. To determine the appropriate sum assured, you must first calculate how much you would need to complete all of your responsibilities (children’s education, weddings, etc.), pay off all of your loans, and sustain your family’s current lifestyle in the long run. In addition to these factors, there is inflation. The original sum that you estimated may not be sufficient for your family’s needs.

So, what should you do? Here are some options:

Option 1: You can increase your coverage by purchasing a new term insurance policy

One way to upgrade your existing term insurance is to purchase a new term insurance plans altogether. In this case, you will have to repeat the documentation process and do fresh medical tests. Given that you’ll be older (and possibly in a new health condition), the upgrading process could turn out to be expensive. In the worst-case scenario, the upgrade policy may be rejected owing to age or health concerns.

In addition to the problems you would face while managing two term insurance plans, your family members will experience their own set of challenges when going through the claims procedure twice. They will need to submit two sets of documents and follow up with each insurance separately, all while grieving your loss. This calculation could become very tedious and messy. So, what other options do you have?

Option 2: You can select the increasing cover option

Instead of dealing with the complications of having too many policies, you can buy a term insurance policy with an increasing cover option. As the name implies, your coverage amount will increase gradually, until it reaches a maximum limit. And, unlike the new policy, you won’t have to go through the new medical tests and neither there is a risk of your coverage getting rejected. The policy will be upgraded systematically without your intervention. Some of the benefits of choosing term insurance plans with increasing cover options:

One premium: When you buy a new term insurance policy, you need to pay an additional premium and the premium for the second policy will be decided by your current age 

and your current health condition. Throughout the period, you will pay two premiums. On the other hand, when you choose term insurance plans with increasing coverage, you will only have one policy and a single premium to pay for the rest of your life.

Automatic increase: When you manually upgrade your policy, you will be required to provide paperwork, sign new declarations, and do new medical tests, among other things. Furthermore, other terms and conditions may apply. However, there will be no need for new papers, documents, declarations, or medical exams to upgrade coverage when you choose term insurance with increasing coverage. There will be no additional terms and conditions required to increase your sum assured as it will be done automatically.

No risk of rejection: If you opt to manually upgrade your insurance when you’re older, you may have to pay higher premiums due to your age and any medical condition or disease you develop during these years. There is also the possibility that the application would be denied due to age or poor health. With an increased coverage option, you won’t have to worry about paying a higher premium or having your insurance denied.

Overall, you can see how selecting term insurance plans with an increasing cover option when purchasing term insurance may be preferable for easy management of your term insurance plan, as well as easy management of claims by your family. It is simple, automatic, and does not require you to undergo any medical tests or provide any additional documentation. All while ensuring that your family has adequate coverage during the policy period.

So we are saying, 

By increasing your health and term insurance coverage, you ensure that your financial safety net remains intact. You will get peace of mind knowing that you are shielded from increasing medical costs and that your family will be financially secure in your absence. Top-up plans provide extra coverage at low premiums, while term insurance with increased coverage options eliminates the need for medical exams and additional paperwork, making topping up a smart and convenient method to protect your loved ones’ well-being. So, don’t wait until it is too late.