The sum insured in a health insurance plan represents the maximum amount of claim that the insurer agrees to settle or reimburse subject to the policy conditions. For example, if the sum insured is Rs 3.5 lakh and you incur a hospital bill amount is Rs 75,000. The insurer will pay Rs 75,000 and the balance Rs 2.75 lakh remains unutilised and it can be used for any other hospitalisation costs incurred during the coverage period, which is generally for one year.
At times choosing between the two - individual health plan and family floater- becomes difficult.
To help you decide better, here is a look at how each of them works.
How individual health plan works
The individual health plan has to be bought in the name of each individual, could be both spouses, children, parents etc. This means, the premium will be as per each individual's age and respective sum insured. Insurers, however, give a 10 percent discount on the total premium if more than one member of the family is insured simultaneously. In case of a claim by one member, the sum insured of other members remains intact.
How family floater health insurance plan works
In a family floater health insurance plan, more than one member can be covered under the same plan. For instance, both parents and their children can be covered together and only one single premium is to be paid. "Typically, 95 percent of the health insurance plans are designed in a way where premium is basis the eldest member in the policy," says Vaidyanathan Ramani, Head- Product and Innovation, Policybazaar.com
Under a family floater health plan, the entire sum insured can be availed by any or all members and is not restricted to one individual as is the case in an individual health plan. A family floater type of plan takes advantage of the fact that the possibility of all members of a family falling ill at the same time or within the same year is low.
Such a plan can be bought by an individual who becomes the proposer along with the spouse, dependent children (up to 25 years or even unmarried), divorced, widowed daughter, and dependent parents. Rather than buying, say, a Rs 2 lakh individual health plan for each member of a family of four, in a family floater plan of say Rs 8 lakh, each person covered under it can avail benefits up to Rs 8 lakh as opposed to Rs 2 lakh in the earlier instance.
For a sum insured of Rs 5 lakh, an individual health insurance plan for someone between the ages 30 and 35 would have a premium of about Rs 12,497, after a 10 percent discount. On the same sum insured, a family floater plan would cost about Rs 10,416, which is nearly 20 percent less.
Children crossing age bar
The age of the parents doesn't matter in a family floater plan but the age of the children does. "For various insurers and plans, it (age of children) varies between 18 years and 25 years. Beyond this specified age, they are treated as adults and have to be moved to a separate plan but will be provided continuity on cover," says Ramani. However, moving the children out of the coverage doesn't impact the continuity for them. If the children moving out are married, they can get their own family floater plan, else they will have to buy individual plans.
In doing so, the benefit of waiting period is not an issue. Mayank Bathwal, CEO, Aditya Birla Health Insurance informs, "This scenario usually happens when a dependent child is moving out of a floater policy to an individual policy due to maximum allowable age of a dependent child under family floater plans. In such a scenario, all continuity benefits such as waiting periods for such insured person on the policy will remain intact with the insured who is taking an individual plan."
What you should do
If you have little kids, then having a family floater health insurance plan is better. "Floater plans offer better cover for lower cost than multiple individual plans. For most families with no major history of chronic issues currently, floaters offer the best option," informs Ramani. However, if you have a family history or if one member has an adverse health condition, buying individual health cover will help in the long run.