- Date : 20/02/2018
- Read: 5 mins
When buying health insurance for you or a loved one, you have the option of buying individual policies or buying one single health policy that covers all of you. Here’s a close look at the latter, called Family Floater plans.
The reasons for buying health insurance are many and now that you have decided to go ahead and get cover, the choice is between covering yourself and your family members individually or through a family floater plan.
So what is family floater health insurance and why should you opt for it?
The salient features of health insurance: family floater plans:
As the name suggests, it is meant to cover the entire family under a single insurance policy and the amount of sum insured ‘floats’ over the entire family.
The health insurance plan can thus be used by any member of the family, up to the sum assured value. For e.g., if a family of four takes a cover of Rs 5 lakhs, all family members together can claim up to that amount.
Family floater health plans usually cover the primary insured, spouse and children, who are dependent on the policyholder (usually a maximum of 2-3). However, some insurance providers do have a provision to cover extended family as well.
Difference between family floater and individual health insurance:
Consider a scenario where a person S1 with a family consisting of S2, C1 and C2 purchases 4 individual policies of Rs 3 lakh each for every family member (total family cover of Rs 12 lakh). On the other hand, he could purchase a family floater for the entire family for a cover of say Rs 10 lakhs. This amount is now available for any or all of the members and comes with the less administrative hassle, lower premium and greater peace of mind.
Let us say S2 needs to be hospitalised and the expense comes to Rs 5 lakh. Assuming eligible expenses are more than the sum assured, the payout will be Rs 3 lakh in an individual policy. The rest of the family members go through the year without utilising any of their insurance coverage.
In the case of the family floater health plan (which for a higher cover of Rs 10 lakh, came at a lower premium), the payout would be Rs 5 lakh and the rest of the family would continue to enjoy a cover of the remaining Rs 5 lakh for the rest of the year.
The principle belief under a family floater is that though it is not known who may utilise the health cover, not all members will fall ill at the same time or incur identical hospital expenses. Thus, even though very high medical expenses for one family member may reduce the amount available for other family members, such a situation is extremely unlikely. More likely is that the majority of family members would end up not using the policies they are paying a premium for.
Administrative convenience: a single policy offering family benefit, without the effort of maintaining separate policies, monitoring usage, and tracking renewals.
Higher coverage: Everyone stays covered and in case of unanticipated high expenditure, an adequate cover is available.
Modifying members: Addition of family members on birth or other reasons as well as the removal of members can be done easily. Low cost: By and large, family floater health plans are much cheaper for the same amount of overall coverage (this is subject to the age of the primary insured). However, there are two scenarios where floaters may prove more expensive: 1) where the age of the proposer is high relative to family members or he/she has an adverse medical history; 2) where accumulated no-claim bonuses of non-claiming members make their individual policies relatively cheaper.
There’s also the question of group health insurance policies provided by employers. These plans are sometimes not sufficient in terms of coverage amount and customisation. It is for this reason that it is always recommended to buy your own individual health insurance. However, if the cost of doing so is too high, family floaters can serve as a low-cost alternative that provides enough cover, but don’t cost as much.
A word of caution
In individual health insurance plans, if a policyholder does not make a claim for a year, they receive a No Claim Bonus, in the form of an increase of sum assured at no extra premium or a reduction in renewal premium. Thus, if four members of the family are covered under separate plans, the members who do not claim are eligible for this bonus. In a Family Floater plan, however, if even 1 member claims, the others are no longer eligible for any such bonus. This, however, does not hold back many policyholders from opting for family health insurance because the overall premium is still much lesser when compared to individual policies.
Additionally, the premium in family floater health plans is decided according to the age of the oldest life assured. Thus, if a family of members aged 3, 15, 35 and 60 take a plan, the premium would shoot up considerably given the higher risk of a claim by the eldest member. In such situations, it is thus recommended to buy a family floater for the younger members of the family and a separate plan for older members.
While a decision on whether to go for a family floater or individual policies would be based on understanding the nuances and comparing both costs and benefits, it is clear that family floaters offer some compelling advantages.