Should you buy a family health insurance or a family floater?

Excerpt: A family floater policy is a beneficial policy that covers the entire family at one time. In what cases should one buy an individual cover for the family and in what cases should one buy a floater.

Manik Shah is a typical Indian. He had an insurance cover for himself through his office, and the rest of his family (father, mother, wife and two children) was uninsured. His insurance company conducted a program in his office where he learned about a policy called the 'family floater,' which was economical and covered his entire family. He signed up for a basic plan with a Rs. 5 lac cover. When his father was suddenly hospitalized, the floater plan made it possible for Manik to get most of the hospital stay reimbursed from the Insurance Company.

Manik's story is much like the rest of the people in the country. Thanks to robust advertising, life insurance enjoys recognition and investment. But the same cannot be said for health insurance. The nation today is chronically underinsured when it comes to medical and health insurance.  Out of pocket expenses made up 62% of all health care costs in India[1]. This figure assumes importance because a lot of these costs could have been avoided if people insured themselves.

Buying an insurance policy is no mean feat, with the numerous riders and terms that come along with the decision. When it comes to health insurance, the first decision to be taken is whether to buy family health insurance or to invest in a family floater? There are different health insurance plans for family,  and if the wrong one is chosen, it can lead to excess payouts out of pocket. Before this question is addressed, let's find out what a family floater policy is.

Family Floater Policies:

Under this policy, it is possible to cover several members of the family. A standard family floater includes the person, spouse, and children. Most insurance companies also provide the option to add parents and even in-laws for an additional premium. The family floater provides coverage to all the family members in case one or more of them are hospitalized at the same time. There are different types of insurance policies under the family floater depending upon what they cover.

a. Medical Insurance
b. Critical Illness Insurance.

Most family floater policies include anyone between the ages of 18 and 60 for adults and include dependent children. A typical policy includes riders on pre and post-hospitalization expenses. Some even have other benefits like maternity cost reimbursements. 

Which Insurance is right for my family?

The decision on which health insurance is right depends on several factors, some of which are:

1. Age of the members of the family
2.Risk factors of the members of the family
3. Budget for insurance

When you should take family health insurance:

Family health insurance is a good option when considering a higher health insurance coverage for individual members. When some of the members face critical health issues, it is better to take individual policies for them. One component of insurance is the risk factor of each applicant. If the members are high risk individuals, it is better to take individual policies. One excellent policy that offers protection against critical illnesses and also combines life insurance is Aegon Life’s iTerm Plus. Depending on the policy selected, it offers coverage against either 10 or 36 critical illnesses. It is a term cum health insurance policy.

 
The family health insurance is beneficial when the family has senior citizens, who cannot be covered under the family floater. In such a case, it is better to take a separate health insurance policy for them. 

When you should take family floater insurance:
When the age gap between members of the family is less, it is better to take a family floater. When the age gap widens, the premiums go up accordingly as compared to individual plans. A comparison of the costs of policies of different companies yields significant savings in a family floater policy even if the policy only covers the applicant and spouse.

One benefit of a family floater policy is that the sum assured can be shared among the members. That way, if one of the members fall sick, and a portion of the sum assured is paid out, the rest is available for others to use in case of hospitalization.

In our example before, let’s assume Manik had a coverage of Rs. 5 lac and needed Rs. 3 lac for his father’s treatment. Since the hospitalization and treatment costs are less than the sum assured, they will be reimbursed by the Insurance company based on the conditions of the policy. Had Manik opted for individual covers for his family, adding to Rs. 5 lacs, it would not have been beneficial for him as he would not be able to claim the expenses from one policy under another policy. Also, in Manik’s policy, Rs. 3 lacs were claimed for his father’s treatment. If someone from his family falls ill again, medical expenses upto Rs. 2 lacs can still be claimed.

An important aspect to be considered in family floater policies is the age of the family. In most cases, the policy lapses when someone in the family reaches 60 or 65 years depending upon the policy. Some companies offer lifetime renewal and others don’t. If you have parents who are senior citizens, it is beneficial to have separate health insurance for parents. Companies offer separate floater plans for senior citizens given their medical needs. It is also more cost effective to get separate family floaters for senior citizen parents.

The decision to opt for family floater or personal insurance depends on many considerations, primarily the age of the family. In today’s world where healthcare costs spiral and new diseases occur with alarming frequency, it is prudent to invest in health insurance. That way, savings are protected and financial capability does not have to be a hindrance to avail medical care. 

Note: Using Section 80D deduction of the Income Tax Act 1961, you can save Rs. 25,000 and Rs. 50,000 include the amount of preventive health checkup. Hence, buying a health insurance is quite beneficial.

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Created on Feb 11th 2019 01:22. Viewed 661 times.

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