You must have heard about various mobile phone family plans that telecommunication companies offer. These plans cover 2 or more persons. Some people might choose family plans to efficiently manage their family members’ usage and bills. On the other hand, some people might choose individual plans for each member of the family. Maybe their son needs an expansive data pack. Maybe their spouse wants a prepaid connection and family plans only offer postpaid services.
So, essentially, you pick what you and your family need. Choosing a health insurance plan is the same.
These plans take care of your medical bills and give you a financial safety net. With rising medical costs, come rising health insurance options. With many plans available in the market, it might be overwhelming to pick the right one.
Broadly, irrespective of the insurance provider, there are two types of health insurance plans - a family floater or individual health insurance. Both types are intended for the same purpose but work differently. Let us understand each plan better and see which would suit your family’s needs.
1. Family Floater Health Insurance
As the name suggests, the sum insured ‘floats’ among each member of the family. In this case, all family members are covered under a single policy with the same sum insured.
Members covered under the Family Floater policy
You can generally cover yourself, your spouse, children, parents, and even your in-laws. Depending on the insurance provider, it is also possible to add other family members like uncles, aunts, and siblings. There are limitations on the number of adults and children who can be added to the policy. They are:
- Some policies accept up to 4 adults while others permit only two adult additions to the policy.
- Some policies accept 2-4 dependent children, while some accept 7-8 children or even more.
- Some policies might impose conditions that one or both parents must be members of the floater policy for child coverage.
- Floater policies provide cover for children only until they are 24-25 years old after which they can move themselves into separate individual policies. They also get credit for all waiting periods they served in their previous floater policy.
Note: The number of children and adults who can be added to the policy varies between insurers. So, go through the policy wording carefully before making the purchase.
?Pros of a Family Floater
In a floater policy, the entire sum insured is shared among the policy members. If you have bought a policy with a sum insured of Rs. 25 lakhs, the amount can be shared or utilised even by a single member for medical expenses. This is because only in rare cases will all family members undergo major hospitalisation charges in the same year.
?Cons of a Family Floater policy
- If a family member makes use of the entire cover, others will be left with little or no cover
Contrary to the above point, there are chances of one member exhausting the entire floater cover. Imagine you have a family floater policy with a cover amount of Rs. 25 lakhs, and one member exhausts the entire claim amount by the start of the policy year. The remaining members will have no claim coverage for the rest of the policy year. This is why you should opt for policies with a higher sum insured to suffice your family’s medical needs.
Now that we know about a Family Floater policy, let us look at an Individual Health insurance policy.
2. Individual Health Insurance
Individual health insurance will cover a single individual's medical and hospitalisation expenses, depending on the sum insured. The coverage is bound by specific terms and conditions as suggested by your insurance provider.
?Pros of an Individual Health insurance policy
Individual health insurance promises independent coverage for the insured member. If you have a family member who is hospitalised often for medical conditions, you can buy individual health insurance so that they can benefit the fullest from the policy. It also ensures that the other policy members are not deprived of coverage because one member uses the entire amount.
?Cons of an Individual Health insurance policy
- More policies, more confusion
If you buy individual health insurance for your family members, it becomes a tough job to handle each policy document and keep track of premium payments. There are also extreme cases of your policy lapsing when you forget to pay the premium dues on time.
- Higher chances of cover wastage
Suppose you have bought an individual policy of Rs. 3 lakhs each for you and your spouse. If you undergo a major surgery of Rs. 5 lakhs, you can get a claim of only Rs. 3 lakhs under your policy and pay the rest from your pockets. This is the case even if your spouse did not make use of their Rs. 3 lakhs for the year. While in the case of a family floater of Rs. 6 lakhs for both, you could have gotten the claim of Rs. 5 lakhs while still having another Rs. 1 lakh left to claim.
Which health insurance should you buy?
This question can be answered only by considering the age of each family member, health status, pre-existing medical conditions, lifestyle choices, etc.
- You can choose a family floater policy when:
⟶ No member of the family has any pre-existing or chronic medical conditions.
⟶ The age difference between the eldest and youngest family members is narrower.
⟶ You want coverage for your kids below 18 years as kids below 18 years cannot be covered under an individual health insurance policy.
⟶ You are the only member who wants to get tax benefits under Section 80D of the Income Tax Act of 1961.
- You can choose an individual health insurance policy when:
⟶ Any of your family members have a pre-existing medical condition or chronic illness.
⟶ The age gap between your family members is wide.
⟶ Several family members want to get tax benefits under Section 80D of the Income Tax Act of 1961.
What coverage should you pick for each policy?
Choose a cover amount that will not just suffice your medical needs today but for your future as well. As you age, you are more prone to medical conditions, and the medical industry will continue to see a surge in inflation. This is why you should choose a sum insured that is adequate to meet such medical needs.
Suppose you are 35 years old today and want to purchase a health insurance policy. Remember that this policy will be with you for your lifetime and so, you need to factor in inflation as well. This will help you reach the adequate sum insured you need for at least 30 or 35 years.
For an individual health insurance plan, your sum insured should be calculated based on your current age, estimated hospital bill, and a rough estimate of inflation (approximately 8-10%). Suppose the highest hospitalisation bill today you could get is Rs. 5 lakhs. You should estimate how much you will need when you reach, say, 60. With an inflation rate of 8-10% year on year, Rs. 5 Lakhs will amount to a need of around Rs. 13-15 lakhs. And, for a floater policy, you need to buy the total of the individual sum insured you were considering buying for each member of your family.
Whether you buy a family floater policy or an individual health insurance policy for each family member, you should make sure that the policy fits your needs. You should ensure to choose an adequate cover amount for either policy type. Hence, make an informed choice by comparing both policies and buying the right one for you and your family.