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How Top-up Insurance Plans Let You Gain Dual Benefits

Published On Sep 27, 2019, Updated On Apr 30, 2020

You don't want to buy health insurance because you are covered by your employer, right?

Having covered by an employer’s health insurance is good.

But considering medical inflation, a group policy by your employer may not be fair enough to bear medical expenses.

What if you happen to get a better option?

What if you come to find a health plan that provides you with dual benefits at a much affordable rate?

Don’t you think it will be fair enough to get covered by a policy with double benefits when medical costs are increasing leaps and bounds?

There are insurance products in the form of top-up plans that first help you increase the sum insured of your policy and secondly save tax.

Let’s get in-depth information about top-up plans and discuss how they come into the picture.

Top-up Plans

To understand top-up plans, imagine your employer has covered you under ICICI Lombard Complete Health Insurance for the sum insured of Rs. 3 Lakh.

Now let’s just make an assumption that you meet an accident and get hospitalised. In that case, you’ll file a cashless claim against the medical costs. But, you come to know that the expenses for ambulance service, surgery, pre and post hospitalisation, medical bills, etc. have gone higher than the sum insured in your employer’s policy.

What would you do to pay the bills? Will you borrow some money from someone? Will you break your personal savings?

This is where a top-up plan comes into the picture. Such a plan can rescue you by supplementing additional expenses and preventing you from breaking your savings.

An existing plan accompanied by a top-up plan can let you end up by paying more than the sum insured in an emergency condition amid the age of medical inflation.

Benefits of Top-up plans

Also called a back-up plan to support finances in an emergency, top-up policies can keep you enjoying coverage benefits even in case the sum insured of the existing policy is exhausted. If you have a top-up plan, you can cover the additional medical expenses for which your basic corporate policy is not eligible.

What’s more? The premiums you pay towards the top-up plans are applicable for tax exemption under Section 80D of Income Tax Act, 1961. This will be like a cherry on the cake!

Features of Top-up Plans

Top-up plans come with plenty of alluring features and benefits.

  • Premiums paid for top-up plans are lesser
  • These plans have fewer risks of rejection
  • They are backed by a deductible clause
  • They can be bought with regular health insurance
  • The sum insured is applicable to both individual and floater plan
  • These plans are available at several insurance providers

Tax Savings

Apart from serving as a financial backup above the threshold limit, top-up plans are also helpful when it comes to saving tax. The premiums you pay towards health insurance policies, including top-up and super top-up are eligible for tax exemption under Section 80D of Income Tax Act. The premiums paid for senior citizens offers higher deductions.

Here are the conditions:

  • If no one is over 60: If no one in the family is over 60, the tax deduction is up to Rs. 25,000. If the medical premiums of a top-up plan paid for parents below 60, then the deduction is up to Rs. 30,000. So, the total deduction is up to Rs. 55,000.
  • If either parent is over 60: In case either parent is over 60, then the premium paid for them lets you enjoy up to Rs. 50,000 of tax benefits. In addition, premiums for family, including self, spouse and children can deduct Rs 25,000. So, the total deduction is Rs 75,000.
  • If the eldest member is over 60: In an individual or family floater top-up plan covering a family with the eldest member over 60, the claimable amount will go up to Rs. 50,000 in tax benefits. Moreover, medical insurance for parents over 60 can fetch up to Rs. 50,000. So, the total deduction in a year is up to 1 Lakh.

Also, read Types of Health Insurance Policies Available in India

Bottom Line

Thus, a health insurance policy lets you enjoy the dual benefit of medical cover and tax saving. If you choose to combine your existing policy - even if it is your current employer policy - the benefit can even double. A top-up policy is designed specially to boost the sum insured of your regular policy and further to let the policyholder enjoy tax deductions.  

Top-up plans are like the indemnity plan, which offers the same benefit as a regular health insurance plan offers. However, it comes with the higher deductible limit that makes the policy, even cheaper and different from regular policies. So, if you want to increase the sum insured limit of your existing policy, buy a top-up policy instead of choosing a new policy. 

Also Read

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