Family Floater Health Insurance vs Individual Health Insurance - Which one to choose?
by S. K. Sethi, Director, RIA INSURANCE BROKERS PVT. LTD.
Q1. What is the fundamental difference between a family floater health insurance policy and an individual health insurance policy?
The fundamental difference between a
Family Floater Health Insurance Policy and an Individual Health InsurancePolicy lies in coverage distribution and cost:
1.
Individual
Health Insurance Policy:
Ø Covers every one person for a
specific sum assured. Policy can cover upto 6 persons.
Ø The sum assured is dedicated solely
to that individual.
Ø Premium is calculated based on the
person’s age, medical history, and other factors.
Ø Suitable for individuals who want
exclusive coverage.
Ø Different individuals in the family
can be given different sum assured.
Ø Policy can be issued to a family
with name of every individual and varying sum assured.
2.
Family
Floater Health Insurance Policy:
Ø Covers multiple family members under
a single policy.
Ø The sum assured is shared among all assured
members.
Ø Premium is always calculated based
on the eldest member’s age.
Ø Cost-effective if all members are
relatively healthy.
Learning: An individual policy ensures full
coverage for one person, whereas a family floater shares coverage among various
family members. It is offering flexibility but carries potential limitations,
if claims are high.
Q2.
How is the "sum assured" handled in each type of policy?
The handling of the sum assured
differs significantly between an Individual Health Insurance Policy and
a Family Floater Health Insurance Policy:
1.
Individual
Health Insurance Policy:
Ø The sum assured is dedicated to a
single person.
Ø If the assured person falls ill and
needs medical care, he can use the entire sum assured for his treatment.
Ø Each family member who has an
individual policy has their own separate sum assured.
Ø
Example:
If an individual has a policy with a sum assured of ₹5 lakhs, he can claim up
to ₹5 lakhs for his medical expenses, regardless of other family members'
medical needs.
2.
Family
Floater Health Insurance Policy:
Ø The sum assured is shared among all
covered family members.
Ø If one member utilizes certain
portion of the sum assured, the remaining amount is reduced for other members
during the policy year.
Ø More cost-effective for families.
Ø Example: If a family of four is
covered under a floater plan with a sum assured of ₹10 lakhs, and one member
uses ₹6 lakhs for a treatment, only ₹4 lakhs is available for the rest of the
family members for the remaining policy period.
Learning: In an individual policy, each
person has their own fixed coverage, while in a family floater, the coverage is
pooled and can be used by any member, which may lead to exhaustion of the sum assured
if one member requires extensive treatment.
Q3.
How are premiums calculated for a family floater policy versus an individual
health insurance policy?
The premium calculation for a Family
Floater Policy and an Individual Health Insurance Policy follows different
methods due to how risk and coverage are distributed.
1.
Individual Health Insurance Policy
Ø The premium is calculated separately
for each assured member based on:
§ Age
§ Medical history
§ Sum assured
§ Lifestyle habits (e.g., smoking,
pre-existing diseases)
Ø Since each person gets their own sum
assured, the total premium is the sum of premiums for all individual policies.
Ø Example: If a 30-year-old has a
policy with a sum assured of ₹5 lakhs, his premium might be ₹8,000 annually. If
his spouse (28 years old) also buys a ₹5 lakhs policy, his premium might be
₹7,500. The total cost for the couple would be ₹15,500.
2.
Family Floater Health Insurance Policy
Ø The premium is based on the eldest
family member’s age because older members have a higher health risk.
Ø A single sum assured is shared among
all family members.
Ø Generally, the premium is lower than
buying individual policies for each member
Ø Example: If a family of four (ages 35, 32, 10, and 7) takes a
floater policy with ₹10 lakhs coverage, the premium might be around
₹18,000–₹20,000 annually. If the eldest member were 50 instead of 35, the
premium would be higher. It can be 25% lower than total sum of every
individual’s premium for all family member.
Learnings
in Premium Calculation:
|
Factor |
Individual Policy |
Family Floater Policy |
|
Basis
of Calculation |
Age
& risk of each individual |
Age
of the eldest member |
|
Coverage |
Separate
sum assured for each person |
Shared
sum assured for the entire family |
|
Risk
Management |
No
impact of other members’ claims |
High
claims by one member reduce coverage for others |
Which
One to Choose?
Ø Young couples or small families → Family Floater
(cost-effective)
Ø Elderly individuals or families with
senior members → Individual
Policies (better coverage per person)
Ø Members with existing health
conditions → Individual Policies (to
avoid risk of claim exhaustion)
Q4.
In what situations might individual health insurance policies become more
expensive for a family than a floater policy?
Individual
health insurance policies can become more expensive
than a family floater policy
in the following situations:
1.
Insuring Multiple Young and Healthy Family Members
Ø If all
family members are young (e.g., under 40) and relatively healthy, a family
floater policy is usually more cost-effective.
Ø Buying separate
individual policies for each member means paying separate premiums,
which will add up to a higher total cost.
Ø Example:
§ Individual
policies with sum assured of Rs 10 Lakhs for a couple (ages 30 & 32) and
their child (age 5) might cost ₹8,000 + ₹7,500 + ₹5,000 = ₹20,500 per
year.
§ A family
floater policy with a ₹10 lakhs sum assured for all might cost only ₹15,000–₹17,000
per year and it is generally 25% lower as compared to individual health insurance
policy, where every individual is covered for Rs 10 lakhs.
2.
When No Family Member Has Major Pre-existing Conditions
Ø If no
one in the family has chronic illnesses like diabetes or heart disease, a
floater policy makes sense because there's a lower likelihood of exhausting the
shared sum assured.
Ø In
contrast, individual policies would require separate underwriting and might
lead to a higher combined premium.
3.
When the Eldest Family Member is Still Young
Ø Since
family floater premiums are based on the age of the eldest assured
member, they remain affordable if the eldest member is relatively
young (below 40–45).
Ø If a
family consists of a couple (35 & 32 years old) and two children,
a floater policy is cheaper than buying four individual policies.
4.
Families with More Members but Limited Medical Needs
Ø If a
family of four or more members has relatively low medical
needs, a floater plan spreads the coverage efficiently.
Ø Buying four
individual policies with ₹5 lakhs coverage each is more
expensive than a single ₹10–15 lakhs floater plan.
When Individual Policies
Might Still Be Better
Ø If the
eldest member is above 50, floater premiums increase
significantly.
Ø If a
family member has pre-existing conditions, a dedicated
sum assured might be necessary.
Ø If
different family members need varying levels of coverage
(e.g., one person requires ₹10 lakhs, while others need only ₹5 lakhs).
Q5.
What are the advantages of having a dedicated sum assured for each individual,
as in individual health insurance?
Having a dedicated sum assured
in an individual health insurance policy offers several advantages,
especially in scenarios where healthcare needs vary among family members. Here
are the key benefits:
1. Full
Coverage for Each Person
Ø Every assured member has a fixed
sum assured, ensuring that their medical expenses are covered without
depending or affecting other members of the family. In the event of no claim
during the year then No Claim Bonus (NCB) is added and cumulative sum assured
increases year by year.
Ø In a family floater policy,
if one member uses up most of the sum assured, others may be left with little
to no coverage.
2. No Risk
of Claim Exhaustion
Ø In a floater policy, a high claim by
one family member (e.g., major surgery or hospitalization) can deplete
the shared sum assured.
Ø With individual policies, each
person retains their full sum assured, reducing the risk of being underassured.
3. Better
for Family Members with Pre-existing Conditions
Ø If one or more members have chronic
illnesses (e.g., diabetes, heart disease), they may require frequent
hospitalization or expensive treatments.
Ø Having a dedicated sum assured
ensures continuous protection without affecting coverage for other
members.
4. Suitable
for Older Family Members
Ø Premiums for a family floater
policy are based on the eldest member’s age, making it more expensive when
covering seniors.
Ø Instead, separate individual
policies can provide tailored coverage and reduce costs for younger
members.
5. Ideal for
Large Families
Ø In larger families (e.g., 5+
members), a single floater sum assured may not be sufficient if multiple
people need medical care in the same year.
Ø Individual policies ensure each
person gets the necessary financial protection.
6. Better
Coverage for High-Risk Individuals
Ø If one family member has a higher
health risk (e.g., due to a hazardous profession or lifestyle habits like
smoking), their policy can be customized separately.
Ø This avoids increasing the premium
for the entire family, as would happen in a floater plan.
7.
Flexibility in Choosing Different Coverage Levels
Ø With individual policies, each
person can select their own sum assured based on their specific health
needs.
Ø In a floater, the same sum assured
is shared, which may not suit everyone’s needs equally.
8. No
Dependency on Family Members' Renewals
Ø If a floater policy is discontinued
(e.g., if the primary policyholder decides to stop renewing it), all members
lose coverage.
Ø With individual policies, each
person controls their own renewal, ensuring continuous coverage.
When
Individual Policies Make More Sense
✅ If the family has elderly
members or high-risk individuals
✅ If someone has pre-existing
conditions requiring frequent hospitalization
✅ If a large family needs
comprehensive coverage for all members
✅ If family members want different
sum assured amounts and benefits
Q6.
What are the potential drawbacks of a shared sum assured in a family floater
policy?
A shared sum assured
in a family floater health insurance policy can be
cost-effective, but it also comes with certain drawbacks that
families should consider before choosing this option.
1. Risk of Claim
Exhaustion
Ø Since
the sum assured is shared, one member’s major hospitalization
can deplete the entire coverage, leaving little or nothing for others.
Ø Example:
If a floater policy has a sum assured of ₹10 lakhs and one member undergoes
surgery costing ₹7 lakhs, only ₹3 lakhs remains for the rest of the family.
2. Not Ideal for Families
with Elderly Members
Ø The premium
is based on the eldest family member’s age, making the policy
expensive if a senior citizen is included.
Ø If the
family includes both young and elderly members, it may be more
cost-effective to buy separate policies for the senior member.
3. Unequal Distribution
of Coverage
Ø One
person might use most of the sum assured, leaving other family members underassured.
Ø If
multiple members need medical care in the same year, the total coverage may not
be sufficient.
4. Higher Renewal
Premiums After a High Claim Year
Ø If a
family member makes a large claim, the insurer may increase
the renewal premium significantly.
Ø Unlike
individual policies where the risk is spread, a floater policy can see steep
premium hikes after frequent claims.
5. Limited Coverage for
Chronic Illness Patients
Ø If one
member has a chronic illness (e.g., diabetes, heart disease),
they might require frequent hospitalization, using up the
shared sum assured.
Ø This
can leave others in the family without adequate coverage if they also need
medical care.
6. Inadequate Coverage
for Large Families
Ø For larger
families (e.g., 5+ members), a single sum assured may be insufficient,
especially if multiple people need treatment within the same year.
Ø It
might be better to opt for higher coverage or a mix of floater and
individual policies.
When a Family Floater
Might Not Be the Best Choice:
❌ If the family has elderly members
(due to higher premiums)
❌ If one member has chronic illnesses requiring
frequent treatment
❌ If multiple members might need high medical
expenses in the same year
❌ If the family is large and a single sum assured
may not be enough
Q7.
How does the age of family members influence the decision between a floater and
individual policies?
The age of family members
plays a crucial role in deciding between a family floater policy
and individual
health insurance policies because it affects premium costs,
coverage adequacy, and long-term benefits. Here’s how:
1. If
All Family Members Are Young (Below 40 Years Old) → Family Floater is Better
✅ Lower Premiums – Since younger
individuals are at lower health risk, insurers offer competitive rates for
floater plans.
✅ Cost-Effective – A shared sum assured
is usually sufficient because young individuals generally have fewer medical
expenses.
✅ Convenience – Managing a single
policy for the whole family is easier than tracking multiple individual
policies.
🔹 Best Choice: A floater
policy with a reasonable sum assured (₹10–15 lakhs) is often the most
economical choice for young couples or small families with kids.
2. If
the Eldest Family Member Is Above 45–50 Years Old → Individual Policies May Be
Better
❌ Higher Premiums for Family Floater –
The floater policy premium is based on the eldest member’s age,
making it more expensive as the senior’s health risk increases.
❌ Risk of Claim Exhaustion – Older
members are more likely to need hospitalization, using up the
shared sum assured, leaving younger members with limited coverage.
3. If
There’s a Large Age Gap Among Family Members → Mixed Approach Works Best
🟢 Example: A family with parents (50+ years)
and children (20s to 25s).
Ø Parents should have separate individual
health insurance because their higher health risks can
lead to frequent claims and increased floater premiums.
Ø Children or younger adults can stay on a
family floater policy to keep the costs lower.
🔹 Best Choice:
Ø Parents:
Separate individual policies (₹10–15 lakhs each). May be
higher.
Ø Young
adults: Floater policy (₹10–15 lakhs shared).
4. If
There Are Children or Dependents Below 25 Years Old → Floater is Ideal
✅ Children and young adults (up to 25 years old) can be
covered under a floater policy with their parents.
✅ Cost-efficient compared to buying separate individual
policies for young dependents.
✅ Once they reach 25+ years, they
should transition to their own health insurance policy.
🔹 Best Choice:
Ø If both
parents are below 40, a floater policy is enough.
Ø If one
parent is above 50, consider separate coverage for the parent
in addition to coverage in family floater plans.
Final
Recommendation Based on Age Groups
|
Age of Family
Members |
Best Policy
Choice |
Why? |
|
All below 40 |
Family Floater |
Lower premiums, shared coverage is
enough |
|
Parents 50+, children younger |
Mixed:
Individual for parents, floater for family with kids |
Reduces cost, avoids high floater
premiums |
|
Eldest member 60+ |
Individual for all |
Floater premiums become too expensive |
|
Young parents + kids under 25 |
Floater |
Convenient, cost-effective |
|
Large family with varying ages |
Combination of floater & individual |
Ensures adequate coverage & cost
control |
Q8.
Can individual health insurance policies be converted into a family floater
policy?
Yes, individual health
insurance policies can be converted into a family floater policy, but it
depends on the insurer’s underwriting guidelines and specific terms. Here’s how
it generally works:
1. When Can You Convert
Individual Policies to a Family Floater?
✅ At Policy Renewal: Most insurers allow
conversion during renewal by merging individual policies into a single floater
policy.
✅ If All Members Are Covered Under the Same Insurer:
If the existing individual policies are with the same insurance provider,
conversion is usually easier.
✅ When the Policy Terms Allow It: Some insurers
have specific guidelines for switching, and they may require a formal request.
2. Process for Converting
Individual Policies to a Floater Policy
🔹 Step 1: Contact a good insurance broker firm
and request a policy conversion.
🔹 Step 2: The insurer will assess the age,
health conditions, and previous claims of all members.
🔹 Step 3: A new floater policy will be issued
with a combined sum assured and revised premium based on the
eldest member’s age.
🔹 Step 4: Any existing waiting periods
(e.g., for pre-existing diseases) may carry over or restart, depending on the
insurer’s policy.
3. Things to Consider Before
Converting
❌ Premium May Increase: If the eldest family
member is above 45–50 years, the floater premium might be higher than
individual policies.
❌ Shared Sum Assured Risk: If one member has frequent
medical needs, a floater may not provide enough coverage for others.
❌ Waiting Periods: If one member has completed
the waiting period for pre-existing conditions in their individual policy,
switching to a floater might restart the waiting period.
4. When Is It a Good Idea to
Convert?
✔️ Young families with no major health issues → A
floater plan is cost-effective.
✔️ Couples or nuclear families with children under 25
→ A floater policy simplifies management.
✔️ If individual premiums are adding up too much
→ A floater may reduce overall costs.
5. When Should You Keep
Individual Policies?
❌ If the eldest member is above 50+ → A floater
might become too expensive.
❌ If someone has a chronic illness → An
individual policy ensures they have a dedicated sum assured.
❌ If past claims have been high → A floater
renewal premium might increase sharply.
Final Verdict:
🔹 Yes, you can convert individual policies to a
floater, but it’s best suited for younger families with minimal health
risks.
🔹 For mixed-age families or those with health
conditions, a combination of floater and individual policies is often better.
Q9.
What factors should a family consider when deciding between these two types of
health insurance?
When deciding between an Individual Health Insurance
Policy and a Family Floater Policy, a family should consider the following key factors:
1.
Age of Family Members
✔️ If all members are young (below
40) → A family floater is cost-effective.
✔️ If the eldest member is above 50
→ Individual policies are better because floater premiums rise significantly
with age.
✔️ If there’s a large age gap →
Consider a mixed approach (individual policy for older members, floater
for younger ones).
2. Health
Condition of Family Members
✔️ If a member has chronic
illnesses (e.g., diabetes, heart disease) → An individual policy
ensures they have a dedicated sum assured.
✔️ If all members are relatively
healthy → A floater policy is a budget-friendly option.
3.
Number of Family Members
✔️ For small nuclear families
(couple + 1-2 kids) → A family floater is sufficient.
✔️ For larger families (5+ members)
→ A higher sum assured floater or a combination of individual &
floater plans is better.
4. Risk of
Claim Exhaustion
✔️ Floater policies share a sum assured,
meaning if one member uses a large portion, others may be left with little
coverage.
✔️ Individual policies ensure each
person has their full sum assured.
5.
Premium Costs & Budget
✔️ Floater premiums are lower
if the family is young and healthy.
✔️ Individual premiums may be
costlier but provide dedicated coverage.
✔️ Compare the total cost of
multiple individual policies vs. a floater before deciding.
6. Coverage
Needs
✔️ If one family member needs
higher coverage (e.g., a senior or someone with a history of
hospitalization), an individual policy is better.
✔️ If everyone’s healthcare needs
are similar, a floater policy works well.
7. Waiting
Periods & Pre-existing Diseases
✔️ In a floater, if a new member is
added, waiting periods (e.g., for pre-existing conditions) may reset for all.
✔️ If an individual has already
completed their waiting period in an individual policy, switching to a floater
could restart it.
8. Renewal
& Portability
✔️ If the primary policyholder of a
floater policy passes away or doesn’t renew, the policy may lapse for all
members.
✔️ Individual policies provide
independent renewability for each person.
9. Future
Family Planning
✔️ Young couples planning to have children
should check if a floater policy covers maternity expenses.
✔️ Elderly parents may be better
off with a separate policy to avoid premium hikes for the entire family.
Final
Decision Guide:
|
Factor |
Family Floater Policy |
Individual Health Insurance |
|
Best
for Age Group |
Young
families (below 40) |
Mixed-age
families (50+ members should get separate policies) |
|
Premium
Cost |
Lower
for young, healthy families |
Higher
but provides dedicated coverage |
|
Coverage
for Chronic Illnesses |
Risk
of claim exhaustion |
Ensures
full coverage per person |
|
Number
of Family Members |
Ideal
for 3-4 members |
Better
for large families (5+ members) |
|
Claim
Impact |
One
claim affects the entire sum assured |
Each
person’s coverage remains independent |
|
Long-term
Flexibility |
May
face issues if the primary policyholder is no longer covered |
Each
member can maintain their own policy |
Best
Approach:
🔹 For young, small families → Family
floater is economical.
🔹 For families with seniors or
chronic illnesses → Mix of individual & floater policies is
better.
🔹 For large families →
Consider individual policies or a high-coverage floater.
Q10.
Why Family Floater Health Plans Aren’t Ideal for the Elderly?
While family floater health plans work
well for younger families, they are not
suitable for elderly individuals (60+ years). Here’s
why:
1. Higher Premiums Due to
Age Factor
Ø Floater premiums are based on the eldest
member’s age, making the policy expensive if a senior
(60+) is included.
Ø Example:
A floater plan for a 35-year-old couple may cost ₹15,000 annually,
but adding a 65-year-old parent can push it to ₹40,000 or more.
Ø Alternative: A
separate senior citizen health insurance policy is often more
affordable and provides better benefits.
2. Risk of Claim
Exhaustion
Ø Seniors
have a higher likelihood of hospitalization, which means they
may use up most (or all) of the shared sum assured.
Ø This
leaves other family members without adequate coverage if they
need medical attention.
Ø Alternative:
Individual policies ensure dedicated coverage for elderly
members.
3. Higher Risk of
Pre-existing Diseases & Waiting Periods
Ø Seniors
often have pre-existing conditions (e.g., diabetes,
hypertension, heart disease).
Ø Floater
policies may come with longer waiting periods (2–4 years) for
such illnesses, delaying coverage when they need it most.
Ø Alternative: Senior
citizen policies usually have shorter waiting periods and tailored
coverage for pre-existing conditions.
4. Limited Coverage for
Frequent Medical Needs
Ø Elderly
individuals may require regular medical care, expensive treatments, or
prolonged hospital stays.
Ø A
floater policy’s sum assured may not be sufficient, especially
if younger family members also need coverage.
Ø Alternative:
Individual senior citizen plans provide higher coverage limits
for age-related illnesses.
5. Renewal &
Portability Issues
Ø If the eldest
member passes away or is removed, the entire floater policy
might lapse, forcing other family members to buy a new policy at a
higher age (and cost).
Ø Alternative: Having
separate individual policies ensures continuous coverage for
all family members.
6. Special Senior Citizen
Plans Offer Better Benefits
Ø Many insurers offer dedicated
senior citizen health insurance with benefits like:
✅ Higher sum assured (₹10-50 lakhs)
✅ Daycare treatments & domiciliary care
✅ Shorter waiting periods for pre-existing
diseases
✅ Lifelong renewability
Ø Alternative: Opting for a senior citizen plan
ensures comprehensive medical coverage without impacting younger family
members’ policies.
Final Verdict: Why Avoid
Family Floater for Seniors?
|
Factor |
Family
Floater Policy |
Senior
Citizen Individual Policy |
|
Premium Cost |
High due to senior’s age |
More affordable for elders |
|
Coverage |
Shared (risk of claim exhaustion) |
Dedicated coverage |
|
Pre-existing Conditions |
Long waiting period |
Shorter waiting period |
|
Frequent Hospitalization |
Reduces coverage for others |
No impact on others’ policies |
|
Lifelong Renewability |
May have age limits |
Typically available |
Best Alternative?
🔹 Young family members (below 40): Opt
for a family floater plan.
🔹 Elderly parents (60+): Get a separate
senior citizen policy for better coverage & cost
efficiency.
🔹 For mixed-age families: Consider a combination
of floater + individual plans.
