Under an individual policy, one policy is issued for each individual. The individual is entitled to the sum insured and other benefits printed in the policy schedule to be used by him. These benefits are not transferable to any other individual by the policyholder.
Under a family floater policy, one policy is issued for the family members enrolled under the plan. The sum insured and benefits offered under this policy can be used by any of the family members who are subscribed to this plan.
Example of Individual and Family Floater Health Insurance
Mr. Insurance is a middle-aged man with a wife and 1 child. He is looking at enrolling all family members for a 5-lac hospitalization plan. He has three options –
o Individual policies for all 3 members – In this case, Mr. Insurance, Ms. Insurance and their child will get a policy each. All three policies will have a sum insured of Rs. 5 lacs each – so, 5 + 5 + 5 (this is not 15 lacs – it is 5 lacs for Mr. Insurance, 5 lacs for Mrs. Insurance and 5 lacs for their child). The premium of carrying all three policies will be high.
o Family floater policy covering all 3 members – In this case, Mr. Insurance will be issued a single policy where Ms. Insurance and their child will also be members to this policy. The total sum insured will remain at 5 lacs which can be used up by all three members.
o Combination of individual and family floater policies – Mr. Insurance may also decide to purchase an individual policy for himself and purchase a family floater policy where the two members are his wife and his child. He might opt to do so because he feels the need for having a higher sum insured that 5 lacs and he may not like to pay for 3 individual policies as it means high premiums.
All health insurance companies offer family floater options across most products and especially in their hospitalization plans. Some companies like Apollo Munich insist that a family floater has to be enrolled for, if pregnancy cover is to be availed. Even critical illness stand-alone policies (Bharti AXA ) come with the family floater option. Do check with the health insurance company if they offer a Self + 1 Child or Self + 2 Children option so that you can also have a combination option that we discussed above.
Use the premium chart to get better health insurance deals
Often insurance applicants would state their requirement for a family floater policy without bothering to look at the various permutations and combinations available. This is not wise because by looking at the complete premium tables, potential policyholders can get more value-per-rupee from their health insurance plans.
Example
Mr. Insurance is aged 37 years while his spouse is 35 years old. He also has two children aged 6 and 2 years respectively. He is interested in a 3 lac rupees health insurance plan that will give health insurance coverage to all 4 members of his family.
ICICI Lombard’s Family Protect Premier offers policies online and Mr. Insurance checks that the annual premium for a 3-lac family floater covering 2 adults and 2 children is Rs. 10,638. This means any of the 4 family members can use the benefits under this policy upto a limit of Rs. 3 lacs.
So, option 1 is a 2 adults + 2 children policy for Rs. 10,638
Further investigation by Mr. Insurance revealed a better deal for him. He figured that he belongs to a different age band from his wife and children. So, if he were to enroll for a Rs. 3 lac plan for just himself, the same shall be available to Mr. Insurance at Rs. 4,449. And for the other 3 members of his family, he opted for a 1 Adult + 2 Children plan where the primary insured would be Mrs. Insurance. The premium of this plan was Rs. 6,459 for the 3-lac plan.
So, option 2 is [Individual policy for 1 adult = Rs. 4,449] + [Family floater for 1 adult + 2 children = Rs. 6,459]. This totals a premium of Rs. 10,908 for a 5 lacs + 5 lacs cover
Option 2 is a better option because by paying an extra Rs. 270, Mr. Insurance has effectively bought a cover of 5 lacs.
4 considerations on choosing an individual or family floater health insurance policy
1. How old are the insured members?
An adult over 45 years of age has a definite health insurance requirement. Also given the fact that fewer companies will give him/her a health cover and especially not without a medical test, it is important to get as much insurance cover as possible. It is better to look for an individual policy as these policies are more life-long covers as compared to family floater covers which may be restricted upto a certain age limit.
On the contrary, a child has two different patterns of health cover. A new born child has the highest level of coverage requirement due to certain congenital diseases to which children are prone to. (read more about common congenital in children in my post on Critical Illness) As the child crosses the 5 year mark, the chances of sickness reduces dramatically and children tend to stay healthy till 18 years of age. So, if you have children in the age group of 5 years to 18 years - you can go for a family floated policy.
2. How much of cover do you really need?
3. How much premium can you pay towards health insurance?
Don't forget to factor in the tax deductions given by the Income Tax Act of 1961. It allows upto Rs. 15,000 in deductions under Section 80(D). You should ideally tend you health insurance expenditure towards Rs. 15,000. However as you get older, the premiums will rise sharply and the Rs. 15,000 number should not be a criteria then
4. Research, research and research health insurance plans
A great deal is right around the corner. Search for that corner. Every health insurance prospect should go through aggregator websites, insurance company websites, go through the policy wordings etc. and then arrive at his/her decision on which policy to choose.
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