Kirti Shah, 36, was shopping for a health insurance cover for his family of three. He was surprised when his insurance advisor gave him two quotes: one was the total cost of individual covers for the three and the other a family floater policy, covering all of them — him, his wife and his six-year-old son. Kirti didn't know the difference between an individual plan and a floater policy. The advisor said the premium for a family floater plan with a sum assured of Rs 3 lakh would be Rs 7,753 (excluding taxes), while the total cost for individual covers would workout to be Rs 12,166 for a cover of Rs 3 lakh each. Needless to say, Kirti is now confused.
To begin with, one should understand the difference between an individual cover and a family floater plan. An individual plan covers only the policyholder, where as a family floater covers the entire family, usually comprising self, spouse and two dependent children. There is usually a family discount of up to 10% on the total premium when the husband, wife, dependent children and/or dependent parents are covered under the same policy. "Since the insurance company is aggregating risks, the premium is lower," explains Sanjay Dutta, head — customer service, health & motor, ICICI Lombard General Insurance Company.
The other advantage of a floater plan is the flexibility that comes with it. Any family member can lodge multiple claims, totalling Rs 3 lakh, the sum assured, in a year. So, any member of Kirti Shah's family can claim up to Rs 3 lakh. But in an individual cover, only the individual who has taken the policy can make a claim and that too for the amount he/ she is covered for.
A family floater policy is also easier to manage than an individual plan. "While renewing, you just need to remember a single date, instead of three or four dates in the case of individual plans," says Anup Bhaiya, MD & CEO of Money Honey Financial Services.
Also, in a floater, it is easy to add a new family member. But, with individual cover, a fresh policy needs to be taken every time there is an addition to the family. In case of the unfortunate demise of the senior-most member of the family, other members of the family can continue with the floater without losing any benefits. "The surviving members can continue to hold the cover as per the policy terms in the case of the death of the eldest member. The policy can be renewed again with the next eldest member becoming the primary member and the policy continuity benefits can be availed of as per the terms and condition of the plan," says Antony Jacob, chief executive officer, Apollo Munich Health Insurance.
"However, a floater policy carries a rare risk," says Sanjay Datta. If a family has a floater plan for a sum assured of say Rs 2 lakh, and if the entire family suffers medical emergencies in an accident, for instance, then in such a case the cover would be inadequate for the family, as each of them may require Rs 2lakhfortreatment.The individual will then have to shell out money from his/her pocket for treatment. In such a scenario, an individual cover will score better . If there is a medical cost of Rs 2 lakh on each individual due to an accident, each of them can claim Rs 2 lakh, provided they are insured for that amount, and they will not have to shell out from their pockets.
Taking a call
Most of us are diligent while buying health insurance covers. On the face of it, a floater policy does come with the cost benefit when compared with individual policies, but then that should not be the only deciding factor while choosing a plan. You need to consider several other factors, too, to figure out which will suit you better. Age would be one of the important parameters to look at. In a floater policy, the cost is governed by the age of the senior-most member of the family to be covered, says Jacob. So it makes sense for a young family to opt for a floater plan. Also if your parents are above 60, then it is likely that they could have higher claims. Hence, they would be better off with individual plans.
If you are covered by your employer , experts recommend that you buy your own family floater also, to add to the one offered by your employer, as it helps take care of interim periods between job switches. "Although you are covered by a floater offered by your company, an additional floater cover is advisable as it would offer coverage to your whole family even if you leave the job or retire ," says Jacob. Also floaters help you get additional cover. So, suppose the organisation you work for covers you for Rs 2 lakh. But if you feel you need a cover of at least Rs 4 lakh, you can opt for a floater of another Rs 2 lakh.
"If the earning member is covered by the employer and does not want to pay double premium, he could opt for a floater," says Gaurav Garg, MD and CEO, Tata AIG Life Insurance. Some financial planners recommend having an individual cover first and adding a floater to that. "As people get afflicted with medical issues separately and at various ages, it is always better to have a primary cover first," says Vishal Dhawan, founder, Plan Ahead Wealth Advisors . If you wish to have higher medical insurance as your age increases, you can take a floater plan, he says.