Health Insurance is a complicated product where people have many questions before they decide to buy a plan.
One of the most common questions that get asked is whether to buy an individual policy or a family floater health insurance? Whether it is advisable to have separate covers for each member or is taking a shared cover more efficient and smart?
Let’s learn about the benefits, drawbacks, suitability of family floaters vs individual plans in this article.
What is Family Floater Health Insurance?
A family floater is a type of health insurance where family members share a single cover under a single policy. It is a ‘one cover for all’ kind of policy.
So, say you buy a family floater for yourself, your wife, and son. Your wife and son meet with a small accident and are admitted to the hospital. In this case, the same health insurance cover will pay for the hospitalisation expenses of both your wife and son.
Advantages of Family Floater Health Insurance
Some major benefits of a family floater cover include -
One large cover can be shared across family members
Under family floaters, the entire pool of coverage will be available for all the members of the family. So, in case one member undergoes a hospitalisation with large expenses, the entire cover will be available for them.
Ease of management
A family floater will cover all your family members under one policy. So, you’ll only have to manage one policy and pay a single premium every year. There are fewer chances of you missing your premium payment and having your policy lapse.
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Drawbacks of Family Floater Health Insurance
Here are two drawbacks of a floater cover -
Covering older family members can make it expensive
Family floaters can become super expensive, if the cover is bought for adults with a large gap in their age. In such cases where the age gap is very high between adults individual plans turn out to be more suitable.
For example, for a family of 3, where the age of the parents is 50 and 45, and the age of the kid is 25, the premiums of a family floater policy with the sum insured of Rs. 30 lakhs will be Rs. 53,814. For the same family, the premiums of 3 individual policies with a sum insured of Rs. 10 lakhs each will cost Rs. 43,183. Thus, you can see how for families with a large age gap, the cost of the floater policy is higher.
One member can exhaust the entire cover
If one person in your family gets hospitalised and ends up using most of the sum insured, the remaining members might be left with inadequate cover. And, in case multiple members of your family get hospitalised at the same time or within the same year, this can be a huge issue.
So, ensure you do not buy a family floater when the age gap between the adults in the policy is very high - not only because it can be expensive, but also because, there is a good chance that the senior member may exhaust the cover, leaving the younger members without the cover or vice-versa.
Of course, this can be solved by -
Ensuring you take adequate cover in the policy for the long term
In case you’re buying a floater at, say, 30 years of age and covering 2 adults who are in their late 20s or early 30s, always go for a long-term cover of Rs. 15 Lakhs per adult. Buy a floater cover of Rs. 30 Lakhs for two adults who will be reaching or have recently crossed the age of 30.
Buying the floater with Restoration Benefit
There’s a feature in most health policies called Restoration Benefit that will restore your sum insured if it is exhausted within a policy year. If you buy a floater plan with this feature, you can ensure your family has sufficient cover, always. In some policies, this feature is available by default, while in others, it is available as an optional benefit.
The conditions for restoring the sum insured may vary across insurers and products. So, ensure you read the policy wordings carefully before going ahead.
What is Individual Health Insurance?
Individual health insurance, as the name implies, is a type of health insurance that covers a single individual. It is dedicated to a single person.
So, if you buy an individual health insurance policy for yourself, only you will be able to make a claim under the policy. If anyone else undergoes hospitalisation in your family, the insurer won’t pay for the expenses.
Advantages of Individual Health Insurance
One main benefit of buying an individual cover is -
If you are covered under an individual policy, you get a sum insured that is dedicated to you. So, in case you or anybody in your family suffers from a chronic condition and needs several hospitalizations, it will ensure that a claim by one family member doesn't affect the coverage of other members. Having an individual health insurance cover helps shield one family member's cover from another’s.
Drawbacks of Individual Health Insurance
Here are a few drawbacks of an individual health insurance plan -
Inconvenient to manage multiple policies
If you take an individual policy for every member of your family, you’ll have to maintain separate policies and pay multiple premiums. You will also have to keep track of many due dates and terms. All this can be inconvenient to manage.
Chances of the cover being wasted
Under a floater, all the family members get access to the entire pool of coverage. In an individual policy, however, the sum insured is restricted to a single individual, resulting in less coverage for each family member.
For instance, Akshay buys two separate individual policies with a sum insured of Rs. 10 Lakhs for himself and his wife, Sujata. A few months after buying the policies, Sujata meets with a major accident and the hospitalisation expenses amount to Rs. 15 Lakhs.
In this case, the individual policy that Sujata is covered under will only pay R. 10 lakhs. Akshay will have to pay the remaining expenses of Rs. 5 Lakhs from his pocket. If Akshay had taken a floater instead of separate policies for himself and his wife, the entire cost of Rs. 15 Lakhs might’ve been covered under the floater.
Now that you know the benefits and drawbacks of both family floater and individual policies, let’s understand which type of cover you should choose.
Individual Health Insurance Or Family Floater Health Insurance - Which One Should You Buy?
|Buy a family floater
|Buy an individual policy
|If the majority of members in your family are young and the age gap is less.
|If the age gap across your family members is more.
|If none of your family members suffer from a chronic illness.
|If one or more family members have a chronic medical condition.
|If only one person in your family wants to get tax advantages under Section 80D.
|If more than one member in your family wants to get tax advantages under Section 80D.
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The type of health insurance you buy has nothing to do with the policy document.If you have a single policy document with multiple family member's names on them - that doesn't mean it is a floater policy. There is a possibility that the individual covers for separate family members are combined and the names of all the members are listed in a single policy.
If it’s a family floater, the cover will be mentioned as a floater, or the cover will be shown as common among all family members.
An individual policy covers a single person under one policy, whereas a family floater will cover your entire family under one policy. Both these policies work differently and have their own sets of pros and cons. Ensure you’re aware of these before you buy a health insurance cover for yourself and your family.