Health Insurance: Family Floater Or Standalone?

Steadily increasing healthcare costs and the bane of lifestyle diseases have contributed to a greater awareness on the importance of Health Insurance in recent times. Even many individuals with in force corporate Health Insurance policies are now opting to increase their family's collective Health Coverage by purchasing policies. Considering that a sum assured of 4-5 Lacs really is quite low for a family of three or four people, this probably makes a lot of sense. A common question in the minds of those buying Health Insurance is: should you opt for individual policies for each family member, or a collective 'family floater' plan? Let's simplify the decision for you.

The difference between the two
It's really quite simple. 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 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 Lacs each, or a family floater of 20 lacs. In case of the latter, even one family member can consume the entire 20 Lacs if required - however, there would be nothing left for the remaining family members to consume. Carrying on from this example; had individual plans of 5 Lacs been taken instead, only 5 Lacs would have been paid by the insurance company and the remaining expenses would have had to be borne out of pocket.

How the Premiums Add 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 per cent 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 per cent more than the cumulative cost of taking up individual policies for each family member

The Dynamics of "Loading"
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
Think about it - for a young family, the odds of multiple members getting hospitalized in the same year are relatively low. However, there's no predicting the actual quantum of expenses if and when an illness were 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 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 important aspects of your Financial Plan.