Health insurance - Family Floater

   Risk is something we just cannot avoid in life. You can be extremely careful, but that doesn't mean you won't fall sick or need hospitalisation. That is exactly why people buy insurance products — both life and non-life — that offer cover for multiple risks such as life, hospitalisation, personal accident, public liability and so on.

However, the real challenge is keeping track of these policies and renewing them year after year on time. This issue leads to two possible scenarios: one, most people do not buy insurance cover; two, even if they buy, many fail to renew it on time. To address this issue non-life insurance companies have come out with the concept of 'bundling'.

The known form of bundle is the 'family floater' health insurance policies. For the uninitiated, one can buy a health insurance policy for an individual to pay for the actual expenses incurred due to hospitalisation in future, subject to the limits set by the insurer. This is termed as an individual health insurance policy. Family floater health insurance plan lets you share the entire sum insured among the family members covered under the health insurance policy, without any individual upper limits. The buyer gets to cover the entire family in one policy at a discounted price and further he can easily keep track of it.

Let's take an example. Consider a family of three — husband (30), wife (25) and daughter (2). While the premium for a 2-lakh family floater policy will be . 6,337, the premium for three individual health insurance policies, will come to . 8,779. Under the family floater, the cover is capped at . 2 lakh for all the family members whereas individual health insurance will ensure that each family member gets a cover of 2 lakh. The second type of bundling comes in the form of 'insurance packages'. Such covers are available on both individual and group plat-forms. You can approach the insurer to buy one or you can buy it through the bancassurance channel where the banks sell such packages for their customers.

The packages typically comprise three to eight different insurance covers. These include hospital cash, health insurance, critical illness, personal accident, education assistance, householder items insurance, personal liability and baggage loss. The buyer can pick and choose the covers he needs. For example, a salesperson, who is just starting his career and happens to be a frequent traveller, would like to buy covers for health, hospital cash, personal accident and baggage loss. In case of middle-aged salesperson with a family to support, the list will be further enhanced with covers for householder items and education assistance to his children.

The biggest benefit of such a policy is that you can buy multiple covers under one policy. You have to fill up one form and write out one cheque. Every time you need to renew it, you just have to write one cheque and not a battery of cheques on various dates. Some of the covers that are available in the package, are not necessarily avail-able as 'off the shelf ' individual policies otherwise. As insurers save on the administrative costs, they do offer you discounts to the extent of 10 to 15% for every cover you buy after the threshold of minimum three covers. On top of this, you may further bag higher discounts, if you are willing to pay for more than one year. Long tenure discounts — for two or three years — are available in the range of 10-15%. You can also extend the package of cover to your family members. In case of any unfortunate event, the insurance buyer needs to file one claim for the various covers he opted for. He is saved of the trauma of chasing different departments of an insurance company for multiple claims.

But not all are happy about the concept of bundling. In case of a family floater health insurance policy, the policy will be renewed only till the senior-most member reaches the maximum age of renewability allowed by that company. After this rest of the members typically have to buy individual policies in their names and insurance companies need not give them the benefits such as waiver of waiting periods since it is a new policy purchase. The no-claim bonus is also lost. The buyer needs to undergo medical if s/he has crossed the age of 45 years. That makes buying the policy even more painful.

A point to note is that the premium payable on the family floater policies depends on the premium payable on the senior-most member. In case of a large claim by the senior-most member, the insurance company may load up the premium when it comes to renewal subject to rules, which will be a huge toll for rest of the members in the plan. There are instances where the family may meet with an accident and many members may need to be hospitalised. In that case, the cover under family floater option may not be adequate.

Bundled covers under packages also need to be carefully analysed before you sign on the dotted line. One may end up buying unnecessary covers just because they can be shopped easily. For example, travelling baggage loss insurance is not required by most of us for most part of the year. Critical illness cover is not required in the early years of life. The packages typically restrict the coverage to sum less than 10 lakh in most cases, which may not be adequate. So better choose packaged covers with utmost care. However, you can consider buying the family floater health insurance if you are in the early years of your life with a spouse and a kid to support and have limited money on hand to insure all. It may not be the best option but surely a better option than an uninsured family.

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