With ever-increasing healthcare costs, hospital bills can burn a huge hole in your pocket. So, having health insurance is a must for all members of a family as they cover all your hospital expenses.
But, when you have to buy policies for more than one member of your family, should you buy separate health plans for each of them or a floater health insurance policy that covers the entire family? Which plan is more beneficial under what circumstances? What are their merits and demerits? In this blog, we will talk about everything related to individual health plans and floater health plans.
First, let’s understand what are individual health insurance policies and what are floater health insurance policies.
Individual health insurance policy
When a health insurance policy covers only one person it is an individual health plan. And the yearly premium amount depends on the person’s age and the coverage amount.
For example, you are 30-years-old and you buy an individual health insurance policy for yourself and another individual health insurance policy for your 56-year-old mother. The coverage amount for both the policies is Rs 5 lakh. Now, the annual premium amount for your policy would be Rs 15,000, and the yearly premium for your mother’s policy would be Rs 30,000.
Floater health insurance policy
A floater health insurance plan covers more than one member of a family. That is, if you buy a floater health insurance plan it will provide cover to you, your spouse, children, and parents – depending on whose name you want to include in the plan. The premium amount of the plan will depend on the age of the eldest person covered under the floater health plan and the coverage amount that you seek.
Under a floater plan, the sum insured can be availed by any member of the family for a particular year. Say, you have a Rs 10 lakh family floater health insurance policy that includes you, your spouse, and two children. Now let’s suppose, on being hospitalized, the bill amount incurred by you was Rs 2 lakh which was covered by your floater health insurance policy. Now, the remaining Rs 8 lakh can be availed by you or any other member named in the policy during that year.
Now that we know the difference between an individual health insurance policy and a floater health insurance policy, let’s look at the advantages and disadvantages of buying a floater policy over an individual health insurance policy.
Here are the 2 advantages of buying a floater policy over buying individual health plans
Number 1: Saves you from the hassle of maintaining too many policies
In case you buy individual policies for each member of your family that means you have to maintain each policy separately, read and understand the terms and conditions for each of them, remember different due dates for their premium, then accordingly calculate the combined premium amount for all the policies to keep a tab on your expenses.
On the other hand, if you buy a floater health insurance policy, your entire family can be covered under a single policy. It saves you from the hassle of maintaining too many policies.
Number 2: Floater plans are cost-effective in case the insured are in a similar age group
In case the insured are in a similar age group, floater health insurance plans are much cheaper as compared to individual health insurance plans. For example, for a young couple in their early 30s, the yearly premium amount for a floater health insurance plan (Rs 10 lakh coverage) would be Rs 14,000. But if they want to do it separately, i.e. Rs 5 lakh individual policies each, then the premium amount would be Rs 10,000 per year for each policy or Rs 20,000 yearly combined premium.
Now that we know about the advantages, let’s look at the disadvantages of floater health insurance policies against individual health plans.
Here are the 3 disadvantages of floater health insurance plans against individual health plans
Number 1: The sum insured is not fixed for each member
For individual health plans, each member has a separate sum insured. Say, you have a Rs 5 lakh individual health insurance policy. On being hospitalized the bill amount was Rs 2 lakh which was covered by your health insurance. And, the rest of the Rs 3 lakh sum insured can be availed by you again in case you are hospitalized for the second time in the same year.
But for a floater health insurance policy, the entire sum insured is meant for all the members covered under the same policy. A particular amount is not fixed for each member. So if one family member makes a claim, the cover reduces on the rest by that much. It is not fixed like Rs 2 lakh each if five members are covered under a floater health insurance policy of Rs 10 lakh. Let’s understand with an example.
Say you have a Rs 10 lakh floater health insurance policy that covers you, your spouse, and your two children. Now, you were hospitalized for certain treatment and the bill amount was Rs 5 lakh. Now, this entire amount will be covered by the floater health insurance policy. But for that year, the cover amount for your spouse and children will be reduced to Rs 5 lakh.
Number 2: No-claim bonus is nullified if one member makes a claim on a particular year
For every claim-free year, your health insurance company rewards you by increasing your coverage amount or decreasing your yearly premium amount. This benefit is called a no-claim bonus (NCB). This benefit can be availed for both individual and floater health insurance policies.
Now, if one member covered under a floater health insurance policy makes a claim in a particular year, then the entire NCB would be nullified for the year. But if each member had separate individual health policies, then the NCB (for the individual health insurance policy) would be nullified for the person who was hospitalized, while others would be able to avail NCB for their own health policies.
Number 3: Children cannot be included in a floater health policy after a certain age
In a floater health insurance policy, once a child covered under the policy reaches a specified age – ranges between 18 to 25 (it differs from policy to policy), they are treated as adults and have to be removed from the floater health insurance plan for the plan to continue.
In that case, along with the floater health insurance plan, you will also have to buy a separate health insurance policy for your son or your daughter.
Now that we have looked at the merits and demerits of both – individual health insurance policy and floater health insurance policy, let’s understand which one is more suitable under what circumstances.
When is buying a floater plan a better option than an individual health plan and vice-versa?
The premium amount for a floater health insurance policy is determined on the basis of the age of the oldest member covered under the policy. So whether you should buy a floater policy or an individual health plan should be determined according to the age gap between the oldest person covered under the policy and the other members in it.
So, it makes sense to buy an individual health insurance policy if you are single and your parents already have their own health plans. Meanwhile, if you are a young couple or you have a family including young children, then buying a floater health insurance policy is beneficial.
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