What are Top-up Health Insurance Plans, and how can these be beneficial?

When you order a pizza, the billing executive usually asks whether you need any top-up of cheese, olives, chicken, or other toppings over the basic pizza you ordered. So, these toppings can be compared with the top-ups in the health insurance industry. Every mediclaim policy has a certain sum assured or coverages which one may exhaust, and thus to have better security, top-up plans come in handy at a reasonable cost.

How do top-up insurance plans work?

Suppose you have purchased a mediclaim policy which has a sum assured of Rs. 10 lakhs. However, given the ever-increasing cost of medical treatment and increased risk of chronic illnesses, especially after the pandemic, Rs. 10 lacks can get exhausted within a few days at the hospital. So, in this scenario, you can have two ways out. You can buy another insurance that has a higher sum assured, or you have a top-up plan to increase your sum assured, but the difference would be in the premium.

Top-up insurance comes into play when the primary insurance policy has been exhausted. Suppose you have this Rs. 10 policy and you fell ill with a chronic liver problem, and the bill amounted to Rs. 16 lakhs. Your primary policy will get completely exhausted, and the remaining Rs. 6 lakhs can be paid using the top-up policy.

Often people confuse top-up policies with riders while both are entirely different. Top-up policies are like primary insurance or reimbursement policies, but the difference is in the premium or the cost of having one.

Features of top-up insurance policies

• As said above, these policies are similar to the primary health insurance plans, so you can also convert them into primary ones.
• If you have a top-up insurance plan covering both parents, the child can automatically get coverage in the same plan.
• There is no upper limit or sub-limits on expenses at the hospital like bed charges, doctors’ fees, and others.
• Many of the top-up plans offer cumulative bonuses on the sum assured for the years where no claims are made, Unlike basic health insurance, top-up plans don’t require you to go for health check-ups. You can avail of these plans based on your basic health insurance policy.
• The top-ups can be renewed every year without any limit.

Coverages provided by top-up plans

Top-up plans usually cover the following expenses:

• Pre-hospitalization expenses of 60 days before hospitalization
• Post-hospitalization cost of 90 days after discharge from the hospital
• Day-care procedures requiring less than 24 hours of hospitalization
• Some of the plans also cover the organ donor’s expenses
• Every hospitalization expense will be covered, from room/ bed charges to doctors’ fees, medications, nurse or attendants’ fees, OT charges, artificial life support machinery costs, implants, and diagnostic procedures as well.

Who should buy top-up health insurance plans?

While anyone can buy these plans, top-ups are more suitable for families with elderly people. As the health risks increase with age, the chances of exhausting basic health plans also increase when there are elderly people. So, having top-up and primary insurance can be beneficial for older adults. Also, if someone has some chronic diseases and requires hospitalization frequently, having a basic health insurance policy of a higher sum assured along with top-up plans can be beneficial.

Advantages of top-up plans

• Top-up policies can be a savior when you have exhausted your primary policy and still, there are many months before the policy renewal. Suppose you need hospitalization within this duration, and then you can use the top-up plan and not have to worry about the expenses at the hospital.
• While you can get the same coverage, the premium you will pay for top-ups will be much less than for primary policies.
• You can also avail of tax benefits under section 80D of the IT Act for the premium you pay for top-up policies.

Conclusion

While general inflation is scaring everyone, medical inflation is at some other level making many families lose their life savings. Thus, having top-up plans to secure your health and finances can be a wise decision to take at this moment.

This blog is purely for educational purposes and not to be treated as personal advice. Insurance is a subject matter of solicitation.

Debt Mutual Funds vs Bank Fixed Deposits: A Better Option for Low-Risk Investors

For many investors, fixed deposits (FDs) offered by banks have been a traditional low-risk investment option. However, with the growth of the mutual fund industry, debt mutual funds have become a popular alternative for those seeking stable and reliable returns. In this article, we'll compare the two options to highlight why debt mutual funds may be a better choice for low-risk investors.

Fixed Deposits (FDs)

Fixed deposits are a type of investment in which an investor deposits a lump sum of money for a fixed term, typically ranging from one year to ten years. In return, the bank pays a fixed rate of interest for the term of the deposit.

One of the main benefits of fixed deposits is the stability they offer. The interest rate is guaranteed for the term of the deposit, providing investors with a predictable return. Additionally, FDs are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC), providing insurance coverage of up to Rs. 5 lakhs per depositor per bank in the event of bank failure.

However, the stability of fixed deposits comes at a cost. The interest rate offered on FDs is typically lower than other investment options, and the returns are taxed as per the investor's income tax slab.

Debt Mutual Funds

Debt mutual funds invest in fixed-income securities such as government bonds, corporate bonds, and commercial paper. They are considered low-risk investments and offer a good option for those seeking stability in their portfolios.

One of the biggest advantages of debt mutual funds is the potential for higher returns compared to fixed deposits. The interest rate on debt securities fluctuates, which means that debt mutual funds can offer returns that are higher than the interest rate offered by fixed deposits.

Debt mutual funds also offer greater tax efficiency. Long-term Capital gains from debt mutual funds are taxed at 20% with indexation, which can significantly reduce the tax liability compared to fixed deposits, where the interest earned is taxed as per the investor's income tax slab.

Another advantage of debt mutual funds is their flexibility. Unlike fixed deposits, which have a fixed term, debt mutual funds can be redeemed at any time, providing investors with access to their money in an emergency.

While debt mutual funds do come with some degree of risk, the value of the securities in the fund can fluctuate due to fluctuations in the interest rate or changes in credit rating.

Final Thoughts

Debt mutual funds and fixed deposits both have their advantages and disadvantages, but for low-risk investors, debt mutual funds may be a better option. They offer the potential for higher returns and greater tax efficiency, along with the flexibility to redeem the investment at any time.

When deciding between the two options, consider your investment goals, risk tolerance, and financial situation. If you are seeking stability and a predictable return, a fixed deposit may be the right choice. However, if you are willing to accept a slightly higher level of risk for the potential of higher returns and greater tax efficiency, a debt mutual fund may be the better option.

Regardless of which option you choose, it is important to diversify your investments and not put all your eggs in one basket. This will help to minimize your risk and maximize your returns over the long term.

This blog is purely for educational purposes and not to be treated as personal advice. Mutual funds are subject to market risks, read all scheme-related documents carefully.

Money Matters: Why Financial Literacy is Important for Women

Women have always been in charge of the household finances. Still, in recent years they have taken on more financial responsibility outside the home. Financial literacy is important for women because they need to manage their own finances and understand financial concepts to make sound financial decisions. Unfortunately, women are more likely than men to face poverty after retirement. A big reason for this is that women tend to live longer than men. But another factor is that women earn less over their lifetimes and have fewer opportunities to save for retirement.

But there's good news: Women can catch up by taking courses, reading books or articles, or working with a financial advisor. And the sooner they start, the better. Yet most women are in a huge time crunch, so it s difficult to find an hour or two to learn about money. To ease this issue, we've created a list to help women with financial literacy.

Financial Literacy for Women: Why It is Important

As the world progresses, more and more emphasis is placed on financial literacy. This is true for women, who have historically been at a disadvantage when it comes to money matters.

There are various reasons why financial literacy is crucial for women. For one, women tend to live longer than men, which means they need to be prepared for a longer retirement. Additionally, women are more probable to take time out of the workforce to care for children or elderly family members. Unfortunately, this can make it challenging to save for retirement or build up enough credit to get a loan. Another reason financial literacy is so essential for women is that they are often the ones in charge of household finances. Even when they don't earn as much as their male counterparts, they are typically responsible for managing the budget and paying the bills.

Financial Literacy for Women: How to Get Started

Women are less financially literate than men, and this lack of financial literacy can hurt women throughout their lives. Financial literacy is important for women because it can help them make better decisions about their money, understand their rights and responsibilities when it comes to personal finance, and avoid financial exploitation.

Women can do a few things to start becoming more financially literate. First, they can educate themselves about basic financial concepts like budgeting, saving, and investing. Second, they can seek out resources like books, websites, and articles that provide information about personal finance. And finally, they can talk to someone they trust about money matters to get advice and guidance.

Becoming financially literate doesn’t have to be difficult or time-consuming.

Financial Literacy for Women: Tips for Saving Money

While there are multiple ways to save money, here are a few tips that can help women get started on the path to financial literacy:

1. Know where your money is going:

Track your monthly spending and see where you can cut back. There's no need to deprive yourself, but small changes can make a big difference over time.

2. Define a budget and stick to it:

Determine how much you need to save each month and set up a system that works for you. Whether it is setting aside cash in envelopes or transferring money into a dedicated savings account, make sure you're disciplined about sticking to your plan.

3. Invest in yourself:

Whether pursuing higher education or taking a course, investing in your future is important. Your financial decisions can affect your quality of life and the people around you.

4. Get out of debt:

If you have credit card debt, education loans, or any other type of debt, the sooner you start working to pay it off, the better.

5. Don't forget about your retirement:

The Sooner you start saving for retirement, the better off you'll be when you're no longer working.

Financial literacy is a key skill for women to possess to maintain financial stability. With knowledge of personal finance, women can make informed decisions about spending and saving, which can lead to a bright financial future. Despite the stereotype that math is a man's subject, financial literacy is not gendered; it is something that everyone should learn. When it comes to money, everyone can benefit from being financially literate.

This blog is purely for educational purposes and not to be treated as personal advice. Mutual funds are subject to market risks, read all scheme-related documents carefully.