We have discussed in a previous article, Protect your family with Health Insurance, why health insurance should form a critical component of your financial plan. With rising cost of healthcare and awareness about insurance products, health insurance or Mediclaim is becoming increasingly popular in India. When you buy Mediclaim, generally there are two options that you can choose from an individual Mediclaim plan or a family floater plan. An individual plan will only cover you up to the sum insured, while a family floater plan will cover your spouse and children. Some family floater plans cover parents also. The cover for the entire family will be limited to the sum insured in a family floater plan. If you want health insurance cover just for yourself, then family floater is not relevant for you. However if you have a family, then which health insurance plan makes more sense, Individual Mediclaim plans for family members or a Family Floater plan? We will discuss pros and cons of both the options, so that you can make an informed choice.

Let us examine the above question, with the example of the Kulkarni family. They have three family members, Ajit (husband) age 35, Priya (wife) age 32 and Shefali (daughter) age 7. The family members have no pre-existing medical conditions. The family decides Rs 2 lakh cover for each member is sufficient. If they decide to buy individual mediclaim policies for each member of the family, let us see what the premiums would be for the Kulkarni family. For sake of illustration we have chosen the Heartbeat Silver plan from Max Bupa.

• Ajit Kulkarni: Rs 3,963


• Priya Kulkarni: Rs 3,724


• Shefali Kulkarni: Rs 1,960


• The total premium for family will be Rs 9,747.

If they decided to buy the Family Floater Heartbeat silver plan from Max Bupa, the following would be the premiums for the different amounts of sum insured.

• Rs 2 lakhs sum insured: Rs 7,479


• Rs 3 lakhs sum insured: Rs 8,569


• Rs 5 lakhs sum insured: Rs 15,639

What should the Kulkarni family do? They can take a family floater policy of Rs 3 lakhs sum insured at a premium of Rs 8,569, which is almost Rs 1,200 less than what would cost them if they were to buy three individual Mediclaim policies of Rs 2 lakhs each. If they take a family floater policy of Rs 3 lakhs sum insured they would save almost Rs 2,000 in annual premium.

Why will a family floater plan make sense for the Kulkarni family?

The health insurance cost or premium for the family will be lower if they buy Rs 3 lakhs sum insured family floater plan, as compared to the individual mediclaim policies. The family is young and they do not have any pre-existing medical conditions or risks. Therefore, the probability of all three family members getting hospitalized in the same year and incurring more than Rs 3 lakhs of medical expense is low. Each member of the family gets a larger cover (Rs 3 lakhs) at a lower cost to the family (Rs 8,569 versus Rs 9,747).

What if one of the family members is hospitalized with a serious illness and incurs a medical expense of Rs 2.5 lakhs?

Let us assume that unfortunately Ajit is hospitalized with a serious illness. His hospital bill is Rs 2.5 lakhs. If the Kulkarni family had bought individual mediclaim policies, as discussed in one of the options, the total cost will be:-

• Amount of medical expense in excess of sum insured (Rs 2 lakhs): Rs 50,000


• Mediclaim Premium: 9,747


• Total: Rs 59,747

If the family had bought a family floater plan, then the entire hospital bill will be covered by the family floater, since it is within the sum insured limit of Rs 3 lakhs. The cost in that case, will only be the health insurance premium of Rs 8,569. So by opting for a family floater plan the family would have saved Rs 51,180.

We can see that with a family floater plan, each member of the family gets a higher health insurance cover at a lower cost. Not only that, healthcare costs are escalating rapidly and Rs 2 lakhs individual mediclaim cover may not sufficient after a few years. By opting for a family floater, you can make provisions for healthcare cost escalations for a few years, because of the higher cover, without having to pay higher premiums to increase the cover. But a family floater plan is not without risks, and the insured clearly need to understand the risks.

What if two family members are hospitalized with a serious illness and incur a medical expense of Rs 2 lakhs each in the same year?

Let us assume that unfortunately Ajit and Priya are both hospitalized in the same year. Both Ajit and Priya incur medical expenses of Rs 2 lakhs each. If the Kulkarni family had bought individual mediclaims, as discussed in one of the options, their medical expenses will be covered by their individual mediclaim policies, and their cost will only be the premium of Rs 9,747.

If they had bought a family floater plan then their total cost will be:-

• Amount of total medical expense in excess of sum insured (Rs 3 lakhs): Rs 100,000


• Mediclaim Premium: Rs 8,569


• Total: Rs 108,569

In such an event, having individual mediclaim policies will have saved the family Rs 98,800. The probability of such events occurring is low, but such unforeseen events can occur and so the insured must be aware of the risks.

If a member of the family has a pre-existing medical condition that puts him or her at a higher risk of hospitalization, then that family member should buy an individual mediclaim policy for him or her and not be covered in a family floater plan for the rest of the family. On other hand, a family floater plan makes more sense for healthy family with no existing medical conditions.

Conclusion

In this article, we have discussed the pros and cons of individual mediclaim plans versus family floater plans. Health insurance buyers should evaluate the options objectively when making a decision to buy health insurance policy for their family. They should also consult an insurance adviser with expertise in health insurance to seek their guidance in making such decisions.

(Insurance is the subject matter of the solicitation. For more details on the risk factors, term and conditions please read sales brochure of the respective companies carefully before concluding the sale and/or contact an IRDA Licensed Insurance Advisor/ Insurance Broker)