Healthcare expenses are steadily increasing and the overall impact of this increase on an average household budget is staggering. As per a latest study by the State Bank of India (SBI), the healthcare expenditure in the financial year 2020-21 was Rs.6 lakh crores. This expenditure is expected to rise by 11%, i.e. by INR 66,000 crores in the financial year 2021-22. The after-effects of the pandemic and the rising medical inflation are the causes that would lead to an overall increase in a household’s medical expenditure.
Can average Indian households meet these rising costs, especially when the per capita income has declined by INR 8637 in the financial year 2021?
Rising costs and declining incomes underline the importance of family floater health insurance plans making them indispensable. These plans cover the whole family against medical emergencies and cover the high medical costs. Let’s have a look at what these plans are all about.
Family floater health insurance – the concept
A family floater health insurance policy is one that covers multiple family members under a single plan. One policy is issued with one sum insured and the members can avail of the coverage up to the sum insured. However, if any member makes a claim and uses a part of the sum insured, the remaining members can make claims up to the unutilised sum insured.
For example, say you buy a policy with a sum insured of INR 10 lakhs covering yourself and your spouse. In a year, you fall ill and make a claim of INR 4 lakhs. If, in the same year, your spouse is also hospitalised, a claim of up to INR 6 lakhs would be covered by the floater plan.
A family floater policy covers the following members –
You, the policyholder
Your spouse
Dependent children
Dependent parents
Some plans also go the extra mile and provide coverage for –
Dependent parents-in-law
Siblings
Uncles
Aunts
Nephews
Nieces
Grandparents
Important aspects of family floater health plans
Here are some of the salient features of family floater health plans that deserve a special mention –
You can add family members to the coverage. Removal of family members is also allowed. This addition or deletion, however, is allowed at renewals. Many plans, however, also allow addition or deletion during the policy tenure. This is called mid-term inclusion and can be done by submitting a written request to the insurer.
Dependent children are covered up to a specified age. This can be 21 years, 23 years or 25 years depending on the policy that you buy.
For other members, however, lifelong renewals are allowed.
If you add your parents to the coverage, the premium paid for their coverage would be allowed as an additional deduction under Section 80D. The limit would be INR 25,000 if your parents are below 60 years of age or INR 50,000 if they are senior citizens.
For example, say you pay a premium of INR 38,000 for a floater policy including your parents. In this premium, the premium component for covering your senior citizen parents is INR 13,000. So, you can claim a deduction on the full amount of INR 38,000 as follows –
INR 25,000 for the premium paid for yourself and your family (spouse and children) if any
INR 13,000 for the premium paid for dependent parents
There is often a debate as to which policy is better – individual or floater. An individual plan is one wherein each family member has an independent sum insured to him/her. Floater plans, on the other hand, offer a single sum insured to all insured members. This is the main difference between these plans. Another difference is the premium. Premium of individual plans is calculated based on the age of each member while for floater plans, the age of the eldest member is considered.
Both individual and floater plans have their respective pros and cons. Have a look –
Individual vis-à-vis family floater plans
Why individual plans are better?
Why family floater plans are better?
• You can customise the plan as per your coverage needs • You can enjoy the full sum insured for your claims The premium would be lower • If you don’t make a claim, you can enjoy the no claim bonus • Dependent children can enjoy lifelong coverage without any cover ceasing age
• Compared to the aggregate premium payable for the individual plans for each family member, the family floater premium is lower. As such, the policy is cost-effective • You don’t have to manage multiple policies for each member • You can customise the coverage as per the needs of the whole family • Each member can enjoy the full sum insured
The choice between individual and family floater plans depends on your needs and requirements. A family floater policy is a hassle-free way of covering your family. However, if each family member has a specific coverage need, you can choose individual health plans.
If you are a young family, a floater plan would be beneficial. However, if you have older children, i.e. those who are approaching majority, a floater plan for self and spouse and individual plans for your children can be a suitable choice.
Moreover, it is usually recommended that you opt for another policy for your parents rather than including them in your own floater cover. This is because –
Your parents’ age would determine the premium. Since they might be old, the premium would be unnecessarily inflated
If your parents make frequent claims, you would lose the no claim bonus
There might be coverage restrictions given your parents’ health. In such cases, the whole family would have to bear the restrictions.
So, assess your family’s composition – the members to be covered, their respective ages, and their health history and then make a choice. You can opt for a floater plan or an individual plan or even a combination of the two. But whatever you do, ensure that your whole family is covered so that for any member’s medical needs, the plan gives the necessary financial assistance. Looking to cover yourself and / or your family member, get in touch with Tata Capital Wealth and we will guide you ahead.
10 January 2022
6 mins read
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