When you are shopping around for a health insurance policy for yourself and your family, the two terms you will repeatedly find on insurers’ websites and aggregators’ websites are individual health insurance policy and family floater health insurance policy. Essentially, both these insurance policy types offer coverage for your medical needs. They are indemnity-based policies and cover the expenses incurred by you on getting a treatment or a surgery. However, there is a fine difference in the way they work.
How individual health insurance works
An individual health insurance plan covers only one person under each policy. The sum insured amount, or the maximum amount you can avail under the policy in a policy year, can be used only by the insured individual. For example, if you have an individual health insurance policy with a sum insured value of Rs.3 lakh, you can avail coverage up to Rs.3 lakh in the policy year. If you get individual health insurance policies for each member of the policy, each one will have fixed sum insured amounts, up to which they can get their medical expenses covered.
How family floater health insurance works
A family floater health insurance plan cover the entire family. You can get a family floater for yourself, your spouse, and up to two children. A few insurance companies allow you to cover up to 4 children, parents, and parents-in-law too.
A family floater, unlike the individual plan, has a single sum insured amount for all members covered under the policy. Let’s say you purchased a family floater with a sum insured value of Rs.10 lakh. You, your spouse, and your children, together, can avail coverage up to Rs.10 lakh in a policy year.
How individual health insurance is different from family floater health insurance
Now that you know the major difference between an individual health plan and family floater, here’s how the two health insurance policy types differ:
- The age of the oldest member determines the premium payable for family floaters
In case of family floater health insurance policies, the age of the oldest insured member is taken into consideration while deciding the premium payable by you. So, if you are a senior citizen or have covered your parents or parents-in-law, who are senior citizens, chances are that you are paying a relatively high premium for the other insured members. In case of senior citizens, it is always best to buy a separate senior citizen health insurance policy which is available abundantly in the market today. These policies have special benefits for people over the age of 65 years and offer higher tax benefits too.
- Family floaters come with a higher sum insured at an affordable premium rate
A family floater for a family of four is cheaper than buying four separate individual health insurance policies for the family. Instead of buying 4 insurance policies with a sum insured amount of Rs.2.5 lakh, you can go for a family floater of a sum insured value equal to Rs.10 lakh. This way, not only will the premium work out lower for you, each member of the family will have access to a much larger sum insured policy. Additionally, insurance companies typically offer about 10% discount on the premium as family discount.
- Individual policies come in handy in case of multiple claims
Family floaters are cost-effective and offer a larger sum insured. However, if two or more of your family members register claims at the same time or in the same year, the sum insured will be exhausted in no time. In such scenarios, individual health insurance policies with a higher sum insured might make more sense. However, as we learnt earlier, this could turn out to be expensive. Thus, you can take the alternative option and get a top-up of, say, Rs.5 lakh along with the base policy of Rs.10 lakh. This will make it easy for you to make multiple claims without having to worry about exhausting your limit before completion of the policy tenure.
- Children can be covered only up to the age of 25 years under family floaters
The drawback of family floaters for dependent children is that they can be covered only up to the age of 25 years. Once the daughter or the son crosses the age of 25, he/she will have to get a separate health insurance policy. This is not the case with individual health insurance policies. No such age limit will be provided to policyholders. In case of senior citizens, a medical examination may be required but they, too, will not be denied a policy on grounds that the age is high.
- The No Claim Bonus is lost if a claim is made by one family member under a family floater
Health insurance companies offer an additional feature called the No Claim Bonus when you maintain a claim-free year. If you are given this bonus, you will get a concession on the premium payable or an increase in the sum insured amount the following year. Since two or more members are covered under a family floater, the chances of maintaining a claim-free years is not very high. If a claim is raised for any of the insured members, the No Claim Bonus is lost. In case of individual policies, however, claims made by one person will not affect the policies for the rest of the members. So, if you raise a claim under your policy, you can benefit from the No Claim Bonus given to the other individual policies held by your family.
Individual or Family floater?
As established, both, individual policies and family floaters have their pros and cons. It is difficult to say which is better than the other because the judgement wholly depends on the family looking to buy the policy. If you have just started a family and have young kids, it is best to get a family floater. If, on the other hand, you or your spouse suffer from a critical illness, you should get an individual health insurance policy. A senior citizen policy is recommended to individuals above the age of 65 years.