Health Insurance: Should one choose individual or family floater?
“Who takes Health Insurance; it’s just a stupid concept to earn more money in advanced countries”. I distinctly recollect this quote when I spoke to my grandfather about 15 years back. Perhaps, if he was right at his time, but, if he were around today, I am pretty sure, he would have had insurance itself. The reason is two-fold. Not only medical expenses have recorded an exponential increase, but there are new diseases coming up every day, making it almost impossible for a person to stay away from disease.
Luckily, we have health insurance. But, this is the start of an even more complicated challenge. The problem refers to selection amongst the wide variety of schemes and offers. With the market flooded with all kinds of health insurance policies, it just makes it impossible for a family to decide what type of policy to take. Well, I am here to resolve one such big dilemma, whether a family should choose individual health insurance policies for each of its members or whether they should go for a collective family floater plan.
What is an Individual Insurance Plan?
First let us start with definitions. By the essence of the name an Individual Insurance means that only one person is covered in each plan, the terms of the insurance, the premium, the sum assured all are entirely dependent on that one person. We can take multiple individual insurance plans; the premium then will be calculated for every plan separately.
What is the Family Floater plan?
Family floater insurance plan is the one where you and your family share the same plan, the premium and the sum assured all shared collectively. Here, the premium amount is calculated based on the age of the oldest member being covered. Now, let’s target the elephant in the room; which one out of them is the better option?
Like all agents in this world, I am going to say the same line, ‘that which insurance is better actually depends upon your own conditions and purpose’. No insurance is strictly superior to the other because, if it were the case, in this competitive world, the rest of the options would have ceased to exist. So, let us discuss a few criteria for comparison.
- Insurance Premium
Since insurance helps you save money, we might as well look at which policy requires a lower premium. The answer to this is a little tricky. In normal circumstances, the family floater plan is the one with the lower premium, because it’s like buying insurance collectively along with other family members who are usually dependents. But, a family floater plan can be more expensive if the age difference between the family members varies by a huge margin. This is because the premium is calculated based on the age of the oldest member.
So, perhaps if your family floater plan includes one of your grandparents, it may not be the best deal, as every family member pays a premium based on their age. As a thumb rule, if the members have less age difference between them, then go for a family floater plan; otherwise, individual insurance is better.
The next important thing about insurance is how much are you getting covered for? The coverage between both the plans is different, so it’s more a choice of the higher amount of coverage to higher flexibility. In individual insurances, every person has an individual amount assigned to them; the one which only he/she can avail in case of any health problem. So, even if someone else takes a claim out of his insurance, it has no bearing on your claim.
On the contrary, in a family floater there is a collective pool of money. Every individual covered in the insurance plan has a right to claim out of the collective sum insured, in case of a health emergency. However, there is one caveat. If someone from your family has already taken out money from the pool, it automatically reduces the coverage for the group overall to that extent. Let us take an example for better understanding.
Example: Consider a case where you have four people in your family. In individual insurance, you want to cover every person with sufficient coverage of Rs.200,000. However, in a family floater you may conclude that combined coverage of Rs.500,000 is adequate for the entire family. Now, for instance, one of your family members has to be hospitalized which results in a total medical bill of Rs.300,000. In individual insurance, you have to pay Rs.100,000 from your pocket, since the personal coverage is only Rs.200,000. As against this, the family floater does not require you to put anything from your pocket, as the combined sum is greater than Rs.300,00.
Thus, a family floater gives you greater flexibility. Now, let us take another case where each one of your members needs medical care which results in an individual bill of Rs.150,000 for every member. In a family floater, you need to pay now INR one lakh from the pocket, while it is all covered in case of individual insurance. So, a higher total amount of insurance is offered in Individual insurances. Thus, as mentioned before it is a trade-off between a higher total amount and greater flexibility.
- Eligible Members
There is a slight difference between Eligibility in the two plans. In individual insurance, every person is eligible for insurance ranging from your spouse to your parents, children and other family members. This is the case of a family floater plan where you can add only your spouse and dependent family members, including only dependent children. This implies that if your children have crossed the age limit of 25 years, then the children cannot be included in the family floater plan.
As mentioned earlier, which plan is best depends on your family dynamics and your own family needs. There are certain rules of thumb, you can apply as a guide. If you have a small nuclear family with growing children, the family floater plan is suggested as it offers comprehensive coverage with lower costs. A joint family with old parents included makes the individual insurance plan more lucrative.
Also, if there are no signs of chronic illness in the family, a family floater is suggested as individuals may not need a higher total cover and flexibility comes in handy. However, in case a chronic illness is present, an individual insurance plan is far superior and preferable in the long run.
Lastly, if you are taking individual insurance, make sure you opt for relevant add-ons for individual members. For example, if you are taking an individual insurance plan for your aged parents, the ASUSH add on is recommended. While, if you are taking a family floater plan, make sure you increase the total cover of the insurance so that the trade-off between flexibility and lower amount works in your favor.