Meet the Kumar family: Mr. Kumar, aged 45 years, Mrs. Kumar, a youthful 42 years, and their vibrant children aged 12 years and 10 years. Recognizing that health insurance has become an essential necessity for most families today and being aware of rising medical costs, the family is searching for health insurance. However, Mr. Kumar is faced with two options — Individual health insurance and Family Floater Health Insurance.
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Should they opt for individual health insurance plans for each family member, ensuring individual coverage, or embrace the collective security of a family floater plan, that covers all four members under one protective shield?
Each option bears its own set of advantages and potential drawbacks, making it essential for the Kumar family to weigh their choices carefully, considering their unique needs and circumstances.
Let’s understand both the options in detail :
Individual Health Insurance:
Individual Health Insurance is a policy primarily designed for a single person, offering coverage on an individual sum insured basis. This means that each family member can have their own separate policy, customised to their specific needs and requirements. What’s more, the flexibility of this product allows you to add family members, such as your spouse and children, in the future if you wish to provide separate coverage amounts to each individual. This unique feature transforms it into a “Multi-Individual policy,” making it a versatile choice for families of all sizes.
For Example:
Mr. Kumar can choose a health insurance policy that covers himself, his spouse, and their two children, with each family member insured for 5 lakhs individually under the same policy. This means that Mr. Kumar , his spouse, and each of their two children have separate coverage of 5 lakhs within the single policy. In the event of a Hospitalisation claim, each family member can claim up to 5 lakhs for their medical expenses from this comprehensive health policy.
Here are some of the salient features of Individual Health Insurance:
Separate coverage:
The biggest advantage is that each insured member gets their own personalised cover.
Comparatively higher premiums:
Since health premiums depend on the age of the insured, covering each member individually leads to higher overall premium payout.
For Example, person aged 42 years and 35 years may have different premium rates as they fall in different premium slab of 40-45 and 30-35 years. The Total premium shall be the total premium against these two ages adjusted against taxes and member discount, if applicable.
Ideal for Pre-existing Conditions:
Suitable for persons with pre-existing diseases. The Individual plan will offer the flexibility to focus on and adequately cover specific healthcare needs and treatments, ensuring individuals receive the necessary coverage.
Family Floater Health Insurance
A single policy that covers the entire family, providing sum insured on a floater basis for all family members.
A family floater is a health insurance plan that extends the coverage to the entire family rather than just an individual. Simply put, a floater brings all the members of the family under an umbrella cover. Being covered under a floater, every family member gets benefits under a larger common pool.
This policy allows any family member to avail the insurance coverage up to the specified policy limit. The premium for a family floater health insurance is calculated based on the age and health status of the eldest family member, along with the chosen coverage.
Additionally, opting for comprehensive coverage for the entire family may prove more cost-effective than obtaining separate policies for each member. However, it’s crucial to be aware that claims are subject to the terms and conditions outlined in the health insurance policy.
Example:
Mr. Kumar can opt for a family floater health insurance policy, which covers himself, his spouse, and their two children for a total sum insured of 10 lakhs. Under this policy, the 10 lakhs of coverage can be shared among any family member in case a claim arises. This family floater policy also offers a family discount when two or more family members are included, providing potential cost savings.
However, it’s important to be aware of a potential drawback. If any insured family member makes a claim, it can impact the No Claim Bonus (NCB) for the entire policy.
Here are some of the salient features of Family Floater Health Insurance:
Single coverage for Family:
The entire family is covered under a single health plan with a joint sum insured amount that can be used to cover medical costs incurred by any or all members covered. Since the sum insured is shared among all members, if one family member exhausts a significant portion of the sum insured, the coverage for the other family members may be affected until the policy is renewed.
Comparatively Lower premium:
By combining coverage limits into a shared pool, the overall premium cost is lower compared to individual plans. Age of the eldest member is considered a premium.
Shared sum insured:
The floater cover amount floats among the family, thereby allowing any member to make claims till the total cover is exhausted.
Floater plans offer a cost-effective way to cover your family with adequate health insurance. The single cover pool allows you to avail treatment for any member without worrying about per person limits. It works best for families where dependents are young adults with minimal health risks.
The compromise is in the lack of flexibility to customise covers and limited tax benefits. Still, with prudent sum insured selection, a floater plan provides an optimal balance of cost savings and adequate family health protection.
Key Differences Between the Individual Vs Family Floater Health Insurance
Coverage and Flexibility:
The key distinction between individual and family health insurance plans lies in their coverage and flexibility. In a family floater policy, the total coverage is shared among all family members. This means that if one family member utilises a significant portion of the coverage, it may affect the coverage available to other family members until the policy is renewed.
Conversely, individual health insurance provides separate coverage for each insured person, offering more flexibility in utilising the total coverage. Claims are subject to the terms and conditions outlined in the health insurance policy.
Premium Calculation:
The premium for a family floater policy is determined based on the age and health profile of the oldest member of the family.
In contrast, individual health insurance calculates the premium based on the age, health condition, and risk profile of each insured person.
Consequently, the premium for individual health insurance may vary for each family member, while the premium for a family floater policy remains the same for all members.
Coverage for Dependents:
Family floater health insurance provides coverage for the entire family, including the primary policyholder, spouse, and dependent children, and sometimes even dependent parents.
On the other hand, individual health insurance provides coverage solely for the insured individual, requiring each family member to have their own separate policy to be covered.
Price:
If you have more than a couple of family members and desire coverage for each member, it’s worth noting that the cost of including multiple members in a family floater plan may be slightly lower than purchasing individual plans for each family member. One must evaluate these options for respective policies for better understanding of these costs.
No Claim Bonus(NCB):
In an Individual policy, if a claim is made, the NCB is affected only for the individual who made the claim. Other individual policies within the family remain unaffected.
On the other hand, if any one member of the family makes a claim, it affects the NCB for the entire policy. This means that the bonus can be reduced or reset for the entire sum insured that covers all family members.
Which option is the right fit for you?
Individual health insurance is strongly advised for larger families or those with senior parents, as a family floater policy may not provide adequate coverage.
On the other hand, a family floater health insurance plan would be suitable for a young couple or small nuclear families.
Conclusion
Choosing the right health insurance policy requires careful consideration of your and your family’s specific health needs, financial situation, and future plans. Whether it’s the focused coverage of an individual policy or the encompassing safety of a family floater, the decision lies on your unique life situation. Remember, the best health insurance plan is the one that aligns seamlessly with your life’s journey, offering you peace of mind and sense of security. Seeking guidance from a qualified financial advisor can further assist you in making informed decisions in this regard.
