Family Floater Or Individual Health Insurance - Which One Should You Buy?

• Introduction
• What Is Family Floater Health Insurance?
  • How many members can be covered under one Family Floater Policy?
  • Advantages of a Family Floater Policy
  • Disadvantages of a Family Floater Policy
• What Is Individual Health Insurance?
  • Advantages of an Individual Health Insurance Policy
  • Disadvantages of an Individual Health Insurance Policy
• Family Floater Vs Individual Health Insurance: Premium Comparison
• Floater or Individual cover - Which one should you buy?
• How much health insurance cover should you buy under each option?
• Important Note
• Some questions you might have

If there’s one thing we’ve learned in the last couple of years, it is that we can’t take our or our family’s health for granted. While it is most important to inculcate healthy living practices, eat good food, and get ample exercise - it is equally important to be prepared to deal with the financial implications of serious hospitalisations, if and when they occur. And, the best way to ensure this is to buy adequate health insurance that can provide financial relief, in times of dire medical need.

Now, as important as it is to buy a health insurance cover for you and your family, it is equally important to buy the right type of cover. Besides deciding the sum insured and what features to pick, the most important decision you'll have to make is whether to buy an individual policy (where you’ll have to buy a separate policy for every family member) or a family floater (where you can cover all your family members under a single policy). 

Although both these plans have the same aim - to provide a cover for hospitalisation-related expenses, they both work differently. So, let’s understand family floater vs individual health insurance, their set of pros and cons, and other things you should be aware of before finalizing which type of health insurance coverage to buy for your family. 

A family floater is like a pool cover where you can take a single health insurance policy and cover all your family members under that. All the members included under the family floater policy can share the cover - the sum insured actually ‘floats’ amongst all the family members. 

Generally, you can cover yourself, your spouse, dependent children, parents, and parents-in-law under a family floater policy. However, there are plans in the market that allow you to add other family members too - such as your aunt, uncle, or your sibling. 

Most insurers put some conditions and caps on the total number of adult members and dependent children that can be added under a single family floater policy. 

• Adults: In some policies, you can add a maximum of 2 adult members, while in others, you can add 4 or even more than 4 adult members. 
• Dependent children: Some insurers allow you to add 2 to 4 dependent children whereas others allow you to add 7, 8, or even more than 8 children. In some policies, there’s also a condition that children can be added to the floater only if both the parents are a part of the same floater plan.

Remember, no two insurance products are alike - and hence, the total number of members you can cover under one family floater policy will vary across insurance companies. In order to know how many adults and children you can add under a single floater plan, you can either go through the policy wordings and brochures of different floater products manually or you can consult a financial advisor, who'll help you understand the products effectively so that you can make an informed decision.

👉 The cover can be shared across the family

In a floater, there are no restrictions in terms of how much cover a member can use. Also, it is very unlikely that everyone in your family will undergo major hospitalizations in the same year. So, if one member falls ill and needs to undergo an expensive treatment, they can use the entire cover for the treatment. 

For instance, if you’ve taken a family floater policy of INR 15 lakhs for 3 members, if one member falls ill, the entire cover of INR 15 lakhs will be available for them. 

👉 No cover will be left for the rest if one person uses the entire cover

Contrary to the above point, there is a high possibility that a single claim can completely exhaust the health cover for everyone else for the remaining part of the year - especially if you’ve taken a policy with a low sum insured. Therefore, to ensure that the total sum insured is sufficient for all your family members, always opt for a higher cover. 

👉 Can be expensive, especially when the age gap between the members is more

The premiums of a family floater policy are charged based on the age of the eldest family member. So, the cost of the floater might become considerably high if you’re planning to take the floater for a family with members across a wide range of age groups. Also, since the elder family members have a higher likelihood of getting hospitalized, and for larger expenses - this would increase the chances of the entire cover being used by the eldest person, leaving the younger members without a cover. 

For instance, for a family of four, where the age of parents is 45 and 48, and the age of children is 21 and 23, the premiums of a family floater policy with the sum insured INR 40 lakhs will be INR 73,606. For the same family, the premiums of four individual policies with a sum insured of INR 10 lakhs each will cost INR 47,630. So, you can see how for families with a large age gap, the cost advantage does not give enough incentive to buy the floater.

Note: Premiums are calculated for a base policy with Any Room type cover. The policy term is 1 year and the premiums are inclusive of tax, taken on 10th March 2022. The premium is calculated for the Activ Health Platinum Enhanced Plan sold by Aditya Birla Health Insurance,  for Zone 1.

Now that we’ve understood what is floater cover in health insurance, how it works, its benefits and drawbacks, let’s take a look at what is individual health insurance, its advantages, and its disadvantages.  

Just like the name suggests, an individual health insurance policy will cover the hospitalisation and medical expenses of a single individual up to the sum insured - and as per the policy terms and conditions. 

👉 Separate cover for every member

If you buy separate individual covers for your family members, each of them will get a dedicated sum insured. Now, if you or anyone in your family suffer from a chronic lifestyle disease or illness and require multiple hospitalizations, taking an individual policy will help insulate one family member's cover from another - and ensure that a claim by one member doesn’t impact another member’s coverage.

👉 Inconvenient to manage for multiple family members

If you buy a separate cover for everyone in your family, you’ll have to maintain multiple policies and pay multiple premiums. This can become very complex and if you don’t pay your premiums on time, there are chances of your policy lapsing.

👉 Chances of the cover being wasted, even when one member needs an additional sum insured

Unlike a family floater policy, where any member can get access to the entire pool of coverage, in individual plans, the cover is restricted at an individual level, which means less cover per family member. 

Suppose you buy two individual policies of INR 5 lakh for you and your spouse. You need to undergo a major surgery that will cost around INR 8 lakhs. In this case, your individual policy will only cover INR 5 lakhs. You can’t use your spouse’s policy - you’ll have to pay the remaining amount from your pocket. If you had taken a family floater policy instead of a standalone policy, the entire cost of INR 8 lakh could’ve been covered if the floater cover was more than INR 8 Lakhs. 

Our research team compared the premiums of an INR 20 Lakhs family floater policy with premiums of two individual plans of INR 10 Lakhs each, for a 32-year-old male and a 30-year-old female - both living in Mumbai. Here’s what they found -

^{Please note: The premiums were taken on 20th February 2022.}

Except for HDFC Ergo Optima Restore, where the cost of floater is lower than the cost of buying two separate individual covers - in all other cases, buying two separate individual policies is a relatively cheaper option than buying a family floater policy. 

The answer to this question will depend on multiple factors, like your and your family members’ age, lifestyle habits, health status, etc.

You can consider purchasing separate individual health insurance covers for you and your family if -

1. Your family has individuals across a wide range of age groups.
2. One or more members of your family suffer from a pre-existing disease or have a chronic illness. 
3. You have no problem managing multiple insurance policies and paying multiple premiums.
4. More than one member in your family wants to claim tax benefits available with health insurance, under Section 80D of the Income Tax Act. 

You can consider purchasing a family floater policy if - 

1. There’s no major age difference between the family members you want to cover. 
2. The members you’re buying the policy for (both young and elderly) don’t have any pre-existing disease or suffer from any major or chronic medical conditions.
3. You want to buy a health plan for your kids (children <18 years can’t be covered under an individual plan). 
4. You don’t want to go through the hassle of managing multiple policy documents and paying multiple premiums. 
5. Just one member in your family plans to get health insurance tax benefits under Section 80D of the Income Tax Act.

Now, that you’re aware of what is family floater health insurance, what is individual health insurance, and their advantages, and disadvantages, let’s understand how much cover you should opt for, under both the options.  

You should consider buying a health insurance cover that is adequate not just for today, but for your old age, i.e., 20 to 30 years down the line. Because when you grow older, develop any kind of lifestyle disease or medical condition, and need to upgrade your health insurance cover, it might become a bit difficult to do it. There might either be a lot of restrictions or the premiums might be quite high. 

But how do you decide the sum insured you should buy? How do you know  if it will be adequate or not? Well, for that, you’ll have to take into account multiple factors, like your age, medical inflation rate, etc. 

You can either calculate the sum insured you need to buy manually or you can use our free 1-to-1 consultation service, where, Beshak’s unbiased research tools will recommend how much cover will be right for you, which type of cover you should choose, etc. and India's top financial advisors will give you free unlimited personal consultation and help you make an informed decision. 

Health insurance is a long-term commitment. It is a promise to pay for the hospitalisation expenses when the time comes. However, a small mistake of buying a policy with inadequate cover would have dire consequences in the future. You may have to bear a major portion of the hospitalisation expenses from your pocket despite being covered under health insurance. That is why it is extremely crucial that you get your health insurance right from the very beginning. 

The type of cover you opt for has nothing to do with the policy document. Sometimes, you could have a single policy document with multiple family members' names on them - that doesn't make it a floater. If it’s a family floater policy, the cover will be mentioned as a floater, or the cover will be shown as common between all family members.

Generally, if the names of multiple members are listed under a single policy, and a sum insured amount is mentioned across the name of each member, it's an individual cover. In case the policy mentions names of multiple members but only one sum insured amount, it's a floater cover. 

1️⃣ What happens when the primary proposer/ policyholder in a family floater passes away? Will the policy get cancelled? 

No, the policy will remain intact. When the primary policyholder or the proposer passes away, any other adult family member can become the new proposer in the policy.

2️⃣ What happens when the kids grow old? How and when do you move them to their separate policies? 

Kids can be covered up to 24 or 25 years of age under a family floater policy in the same policy. Once they become adults, they can be ported into their separate individual health policies with credit for all waiting periods served. While you do this, please make sure you do not reduce the sum insured of the floater plan. Instead, if you have the opportunity, upgrade the sum insured of the floater - so that you and your spouse have sufficient cover in your older age. 

Got a question related to family floater or individual health insurance?

Post it on the Beshak Insurance Forum and get answers from insurance experts!