What Kind Of Health Insurance Do You Need?

Burgeoning healthcare costs and the steadily escalating instances of lifestyle diseases – even among the younger populace - have contributed to a greater awareness on the importance of Health Insurance in recent times. A very common question that Health Insurance buyers tend to ask is this: should you opt for individual policies for each family member, or a collective ‘family floater’ plan? Here’s a simple ready reckoner to help you decide.

What’s the difference?

An individual Health Insurance plan gives you a cover (the maximum amount that the insurance company will pay for your hospitalization) that applies to you alone, whereas a family floater plan gives you – as the name suggests - a cover that ‘floats’ between your family members. For example – if you’re a family of 4, you could either take out individual plans of 5 Lakhs each, or a family floater of 20 lacs. In case you choose the family floater plan, even a single family member can consume the entire 20 lakh cover if it comes to that; however, there would be nothing left for the remaining family members to consume. Carrying on from this example; had you instead chosen to take up individual plans of Rs. 5 lakhs each for each family member, only 5 Lakhs would have been paid by the insurance company and the remaining expenses would have had to be borne by you out of your own pocket.

How the numbers stack up

Here’s a ballpark estimate of how the premiums add up:

1.            For young families (where the eldest member is in his or her thirties), a family floater plan usually costs 15-25% more than the cumulative cost of taking up individual policies for each family member

2.            For older families (where the eldest member is in their fifties), a family floater plan usually costs 50-60% more than the cumulative cost of taking up individual policies for each family member

How loading works

It’s a well-known fact that health insurers ‘load’ the premiums in case of pre-existing illnesses. It’s important to note that in case of family floater plans, the ‘loading’ factor of a pre-existing condition will apply to the entire family, and not just to the family member who has the illness. The same loading logic applies when you apply for an increase in coverage as well, which may lead to fresh underwriting. Given this, it makes sense to exclude members with a pre-existing condition from a family floater plan. It’s also worth noting that the premium for a family floater plan will depend upon the age of the eldest family member – which brings us to our next point.

Opt for a Family Floater only if you’re a young family

For a young family, the odds of more than one family member getting hospitalized in the same year are relatively low. However, there’s no predicting the actual quantum of expenses if and when an illness was to strike. The cost differential between a family floater and individual policies is also relatively low for a younger family. Opt for a family floater only if the oldest family member is less than 40 years of age.

Opt for Individual Plans for your aging parents

A final word of advice - if you’ve got parents who are aging, it’s a lot better to purchase individual plans for them as they might render your family floater plan prohibitively expensive. But never, ever compromise on your health cover! It’s one of the most critical aspects of your Financial Plan.