How does a family floater health insurance work?
Surely, you’re aware of family plans offered by most mobile companies. Positioned as much better, cheaper alternatives to multiple individual plans, these are easy to manage without the hassle of several bills or customisations. To top that off, companies even offer fantastic discounts as they end up getting multiple customers in one go!
What if we told you that similar to family mobile plans, you could also buy family health insurance plans - that are easy to manage and could be cost-efficient too? Introducing - ‘Family Floaters’. Covering the health insurance needs of your entire family, a single floater plan can be a good alternative, to skip the effort and hassle involved in buying and managing several individual plans.
In this quick article, we’ll quickly go through how such family floater plans work, their benefits and drawbacks and help you decide if family floater plans are right for you.
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What is a family floater plan?
A family floater is a type of health insurance in which you can buy a single plan to cover your entire family. If one member from your family has a major medical condition that needs expensive treatment, the entire cover of the policy can be available for that person’s treatment. As it is less likely that several members of the family should need major treatments within the same year, this large cover comes in handy for anyone who needs it.
As long as the total claim amount doesn’t exceed the Sum Insured, this cover can be utilised for one or more family members, when they need it.
For example, you can get a floater of INR 20-25 lakhs for your family of 3-4 people. In case one person undergoes a large hospitalisation amounting to INR 20 lakhs in a given year - this will still be covered by the plan. In another case, if 2 or 3 individuals undergo treatments of INR 5 lakhs each - the floater will still pay for it.
Who can you cover under a family floater plan?
Under a single family floater plan, you can insure -
- Your spouse
- Upto 4 dependent children (less than 25 years of age), and
- Upto 2 parents or parents-in-law
- Some policies also allow the combination of 1 parent + 1 parent-in-law to be covered.
- Max Bupa Family First is the only exception that allows coverage of extended family (upto about 19 relationships) under one policy.
Who should buy a family floater plan?
Family floater plans are suitable for your family, in the following situations.
- Young family: A majority of your family members are young, and are less likely to need hospitalisation within the same year.
- No major medical conditions: No member in the family has any major/ or chronic medical conditions
- Only one person needs a tax benefit: When only the proposer needs to claim tax benefits available with health insurance plans, under Sec. 80D.
Who should avoid buying a family floater plan?
Family floaters might not be beneficial for all families. If your family fits any of the following situations, you might want to avoid buying a family floater plan.
- Wide age gaps: If your family has individuals across a wide range of age-groups (say, yourself, spouse, your parents and children) - then, the cost of the floater might become considerably high. Further, the elder members are more likely to get hospitalised and use up the cover, leaving the young members without a cover.
- Have chronic medical conditions: Similar to elderly family members, members with a chronic illness too have a higher likelihood of getting hospitalised for larger expenses. If this is true for your family, a floater might not be suitable.
- More than one member needs a tax benefit: When more than one of your family members plans to get a tax benefit available with health insurance, under Sec. 80D
How much floater is adequate for your family?
You should buy the aggregate of the individual sum insured you were planning to buy for every member of your family. For instance, if you are looking at buying INR 10L per adult family member (that’s the minimum cover we recommend you buy per adult individual) , and you’re purchasing the plan for 2 adults - you must buy INR 20 Lakhs aggregate cover as a floater. Do not reduce the cover to INR 10L or 15L just because it is a shared cover. This will ensure that there is sufficient cover, in case both of you need it within the same year, like it happened during the pandemic.
What are the benefits of family floaters?
There are two major benefits of a family floater plan.
Floater plans can be considerably cheaper compared to individual plans for every family member, especially if the age-gap between members is not major. For example - you could take a floater to cover yourself and your spouse (similar ages) - the overall premiums could be relatively lower than individual plans for the same cover amount.
2️⃣ Ease of policy management
Since you’ll only be buying one policy, managing health insurance for all your family members becomes simpler. You might still need to go through medical declarations (and tests, if necessary) for all family members. But, once the policy is approved, you’ll not have the hassle of managing multiple documents, paying multiple premiums or risking forgetting any of them, causing a lapse.
Are there any drawbacks to family floater plans?
Having said that, family floaters do have a few drawbacks - and you should learn about these carefully before depending on them for your family’s health care expenses.
1️⃣ If one family member uses up the cover, the rest of the family might be left without adequate cover.
As mentioned above, if anyone in your family needs hospitalisation, they can use the entire cover for treatment. However, in such a situation, if another member too needs hospitalisation, they might be left without adequate cover. This happened in several cases during the last year in Covid19 hospitalisations. Several members of the same family were admitted for treatments, one after the other. As the first family member to get hospitalised used up a large chunk of the cover, the rest were left without enough. To avoid this situation, you should choose a large enough cover for the floater, along with a restoration benefit where available.
How can you ensure your family has sufficient cover, always?
Some floater plans come with a benefit called ‘restoration’. With this option, if one person of the family uses up the sum insured within a year, it is restored (or refilled) - so other members are not left without a cover. Some family floaters have ‘restoration’ as a default benefit, while in some it is an optional benefit.
The terms of restoration of Sum Insured vary widely across Insurers and products. Read the policy wordings carefully and ask your advisor questions related to the trigger of restoration & its extent before purchasing a family floater health insurance plan.
2️⃣ An incorrect declaration will impact the entire family’s health insurance coverage
If any one of the family members provides incorrect medical history to the insurer, and this is revealed during a subsequent claim - the insurer would want to renegotiate the entire policy. As a result, there is even a risk of the policy being cancelled altogether, or the premiums changing drastically (becoming unaffordable) - putting the entire family’s health cover in jeopardy.
Some common questions you might have about family floaters
1 - What happens when the primary policyholder dies in the Family Floater policy?
When the proposer or the primary policyholder dies - another adult member in the policy can become the proposer of the policy, after informing the insurance company at the time of renewal.
There is a myth going around that the policy lapses when the primary policyholder passes away - that's not true.
2 - What happens when kids become adults?
When the kids included in a family floater become adults (25 years of age), they can no longer be covered under this floater. In this case - they should be moved to an individual policy.
As you do this, do not reduce the sum insured, as this higher sum insured will be needed for you and your spouse in your older age. In fact, if you have the opportunity, upgrade the sum insured as well.
As an alternative to buying separate health insurance policies for every family member, you can take a family floater - a single policy that will cover all your family members. Compared to buying separate individual policies, they can be relatively cheaper, easier to manage, and you can also get a large cover that can be shared across your family.
However, if one member uses the entire cover, no cover would be left for the rest. Weigh in all these pros and cons before deciding if a family floater is suitable for you.
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- Family floater plans allow you to take a single health insurance plan, for all the members of your family under a single policy.
- Family floater plans can be relatively cheaper if your family comprises of members of similar age groups
- You should consider the possibility that one elderly family member might use up the entire cover amount, leaving the rest of the family - especially the younger ones without adequate cover.
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