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Insurance Article

Are Family Health Plans Better Than Individual Policies

May 29 2015
Health Insurance

We can insure ourselves from healthcare expenses by paying a fixed amount of premium towards health insurance. These policies, to an extent, help us in meeting healthcare and hospital expenses in case of emergencies and hence should be availed at the earliest.

With privatisation of insurance sector there are large number public and private enterprises providing health insurance in the country. As a result of which there are a host of policies to choose from. The first choice an individual faces before taking a policy is between a family cover (family floater) and an individual policy.

An individual policy is one in which each person is insured with a defined cover. However in a family floater an individual can insure his/her spouse, children and in certain cases parents as well. The amount insured can be utilised by any member. For example if Mr. Gupta opts for a family cover of Rs. 4 lakhs, his entire family, including his wife and two children will be covered in that same amount.

Why do people prefer family floater plans over individual policies?

  • Family floater policies are advisable for younger families with lower health risks. As we can see in Table 1 the premium for Mr. Gupta s family is much lower than Mr. Malhotra's family owing to the difference of age between them.
  • The insurance premium on family cover of Rs. 4 lakhs as we see in Table 1 would be cheaper than opting for 4 individual policies for Mr. Gupta's family. And the covered amount would also be greater than in individual policies of Rs. 2 lakhs each.
  • In case of only one claim in a year the claim amount would be greater than that of an individual policy.
  • Disadvantages of Family Floater plans

    • The policy can be renewed till the eldest member of the family reaches the maximum renewability age, which is 65 to 70 years in most policies. At that stage the other family members would have to take a fresh policy without any benefits from the previous one.
    • This also applies to the children who are 21 to 25 years (depending on the policy) of age post which they would have to buy a separate policy for themselves and would no longer avail benefits from the family cover taken by their parents.
    • Generally most policies cover only spouse and children with few exceptions that cover self, spouse, parents as well as parents in laws.

    Hence for older families, the family floater plans would not be as beneficial as for younger families. Hence, Mr. Gupta can consider buying a family floater plan with an additional individual plan for him in case of any critical illness, while individual plans can be considered for Mr. Malhotra's family.

    However, choice of the best health policy would depend upon many factors including financial status, health condition, age, number of dependants, critical illness or disability of the policy taker. The choice is difficult and as stated in the beginning please remember "Health is Wealth" so stay healthy and choose wisely.

    Table 1 : Comparison of Premium between an older family and younger family
    Family Guptas Malhotras
    No. of members 2 Adults 2 Children 2 Adults 2 Children
    Age 35, 33 11, 7 45, 41 18, 16
    Insurance premium under Family Floater
    (Rs. 4 lakh cover)
    Rs. 11,528 p.a.   Rs. 17,573 p.a.  
    Insurance premium under Individual Policy of Rs. 2 lakhs each Rs. 3,610 p.a. per person   Rs. 4,085 p.a. per person  

    * Source: IRDA Committee Report dated 22nd May 2015.

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