Insurance:When Group Cover Falls Short, Try Voluntary Top-ups

Preeti Kulkarni & Vidyalaxmi explain how to bridge the gap with some extra health cover when the group insurance offered by your company falls short of requirements     Voluntary top-up covers, which allow employees to add extra health cover to their group insurance policy offered by employers, are fast becoming popular. Many companies, which were forced to trim their group health benefit packages in the past three years due to rising premium costs and a slowdown in the economy, are encouraging their employees to use this route to buy adequate health cover for themselves and their family. And employees, it seems, are happy to pay the additional premium for the add-on cover. Financial experts also approve of it as they believe that the average group cover is inadequate to take care of the hospital bills of most people.  "Almost 66% organisations have made changes to their benefit plan in the past two years to combat the rising cost of medical insurance. This trend is likely to continue. However, considering that a 'benefit cut' does not really lower the employees' risks or needs; organisations have now started offering voluntary topup plans," said Sanjay Kedia, country head and CEO of insurance broking firm Marsh India. "According to our 2011-12 survey, 67% of employees said they would like to buy such top-up plans."  "Top-up schemes linked to group covers are increasingly gaining prominence. We have seen good demand for such offerings and it is a viable proposition for us," said Amit Bhandari, vice-president, health underwriting and product, ICICI Lombard General Insurance.  According to insurance experts, the average cover of . 2-3 lakh offered by group insurance schemes may not be adequate to take care of the medical expenses of employees and their families. This willbecome crucial in future because medical inflation has been growing at 12-18% per year. This would surely mean that most employees won't be able to take care of their future hospital bills if they or their family members have to undergo treatment for any major illness. This apart, group covers could come with sublimits on room rents and treatment of certain ailments. Parental coverage has also been at the receiving end in the last two years. Many companies have either scrapped or scaled down the cover offered to employees' parents. Some companies extend cover to parents only if the employee agrees to fund the premium.  Given the dynamics at play, it is clear that group covers fall short of employees' requirements. This is where top-up covers can be used to bridge the gap, feel experts.  Typically, the size of such add-on covers ranges from . 2 lakh to . 10 lakh. They kick in when the hospitalisation expenses breach the base group policy limit. The premium for the additional cover is usually deducted from the employees' salary. It is eligible for tax deductions under Section 80D. The annual premium for a 40-year-old individual opting for a top-up of . 5-lakh may work out to around . 1,500-2,000. They can enroll for the top-up policy through employers' existing IT infrastructure, say, the intranet platform. Usually, the insurance company provides a link that enables the employees to complete the process online. They can enter the relevant details asked for and buy the top-up cover.  "For an employee, the advantage is that the cost is lower than that of an independent top-up plan. Moreover, they can immediately avail of the pre-existing diseases (PED) cover here, unlike individual policies that prescribe waiting periods for the same," said Bhandari. Also, since these top-ups are offered as part of corporate policies, they will come with a wider range of benefits.  "For specific corporate customers, we may customise the top-up cover so that all benefits that apply in the current policy can be offered on top-up basis, too," said Amarnath Ananthanarayanan, managing director & CEO, Bharti-AXA General Insurance.  Finally, it is always better to have an individual health cover or a family floater plan, as the group health cover ceases the moment you leave the job. Even some topup covers added to the group health cover may lapse if you leave the job. You have to check this aspect with the insurer before buying a top-up cover.  Also, you can consider buying an independent top-up plan if you already have a health insurance cover, instead of holding multiple health insurance policies. Such add-on policies are cheaper than standard hospitalisation policies by almost 40%. "From a customer's perspective, one has to see if he/she is able to get a significant price advantage as compared to individual top-up plans available in the market," said TA Ramalingam, head, underwriting, at Bajaj Allianz General Insurance.  preeti.kulkarni@timesgroup.com