Expensive as they appear, it is sometimes better to go for individual policies for the whole family

Author : Harsh Roongta/DNA

Today, there is increased awareness about healthcare costs and how mediclaim insurance helps mitigate the risk of such costs. One question for the first time buyer is whether to take individual insurance polices for each family member or a family floater policy.
Before we look at the pros and cons of the various types of mediclaim policies available, let us quickly look at what each of these policies means.
An individual policy means a separate policy for each of the family members. That means, if in a family of three members, each of the family member is covered for Rs 2 lakh, then eligible hospitalisation expenses incurred up to that limit for that particular individual only would be reimbursed.
In contrast, in a family floater plan, the limit can be utilised by any of the family member. If the same family takes a family floater plan for Rs 4 lakh and say eligible expenses incurred for one of the members was Rs 3 lakh, it will be fully reimbursed. So, in many ways, the family floater plan offers flexibility in terms of utilising the overall insurance coverage among the family as a group.
This would seem to indicate that a floater plan is always more beneficial for a family. However, there are several other considerations that need to be taken into account before taking this decision. We have used some examples to understand this better.
The table mentions the cost of an individual insurance policy for two typical families from Star Health (the company has been chosen at random since it offers both individual policies and family floater policies and has very similar policy wordings for both individuals as well as family floater policy and hence any comparison will be on a like to like basis).
We then tried to find out the value of a family floater policy that they will get for about the same amount of premium. And we found that the older family would be able to get a family floater plan for Rs 4 lakh at almost the same cost (Rs 13,092 as compared with Rs 13,106 for the individual policies). The younger family fares much better with a family floater policy of Rs 5 lakh available at a much lower cost (Rs 6,998 instead of Rs 7,776 for individual policies).
As can be seen, for the older family, for the same amount of premium, the family floater plan doubles the amount available for each family member (Rs 4 lakh from Rs 2 lakh) while halving the overall family cover (Rs 4 lakh from Rs 8 lakh). For the younger family, on the other hand, the flexibility is increased dramatically (Rs 5 lakh from Rs 2 lakh) without a significant impact on the overall family cover (Rs 5 lakh from Rs 6 lakh) and with money saved to boot.
The reason for this is not far to seek. The family floater plans are priced on the basis of the age of the senior most member and as he/ she gets older, the flexibility decreases and/ or the cost increases significantly.
There are other disadvantages to a family floater policy as well. The policy will be renewed only till the senior most member reaches the maximum age of renewability allowed by that company. As it stands today, at that stage, the other family members will need to take a fresh policy without having the benefit of their claim history and pre-existing disease coverage that comes from continuous renewal of the policy. The same applies to children who reach the maximum age (normally 25 years in most cases) after which they will need to buy a separate policy for themselves without the benefit of the earlier continuous coverage that they have got under the family floater policy. Most policies also make no specific provision for continuing cover of the surviving members in case of the unfortunate death of the senior most member.
All in all, since continuous coverage and claim history is critical in this category and currently there does not seem to be any stated basis for taking these with you when you are forced out of a family floater plan, we would strongly recommend taking individual policies for the whole family.

The writer is CEO, ApnaInsurance, a price comparison site that allows consumers in India the ability to compare the premiums and features of life insurance policies as well as general insurance policies such as health insurance. It helps customers search and apply for all their insurance needs.

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