Do you need a floater plan?
By Jay Sampat |
8/15/2011 2:18 PM Monday
My colleague, Sandeep, was recently shopping for health insurance cover for his family. His insurance advisor gave him two quotes: one was the total cost of individual covers for the three members of his family – Sandeep, his wife and their five-year-old son – and the other, a family floater policy, covering all three of them.
The advisor told him that for a sum of Rs 3 lakh assured, the premium for a family floater plan would be around Rs 8000. On the other hand, the total cost of premium for individual covers of Rs 3 lakh would work out to around Rs 12000. Sandeep was confused as to what he should do, as he wasn’t clear about the difference between an individual plan and a floater policy. This article unravels the various aspects people like Sandeep need to consider, while choosing an individual plan or a floater policy.
For starters, one should make it a point to understand the difference between a family floater plan and individual cover. An individual plan covers only the policyholder, where as a family floater covers the entire family, usually comprising self, spouse and two dependent children. There is usually a family discount of up to 10 per cent on the total premium when the husband, wife, dependent children and/or dependent parents are covered under the same policy – the premium is lower as the insurance company is aggregating risks.
The other advantage of a floater plan is the flexibility that comes with it. Any family member can lodge multiple claims in a year, up to the limit of the sum assured. In contrast, for individual cover, only the individual who has taken the policy can make a claim for the amount he/she is covered for. Moreover, a family floater policy is also easier to manage than an individual plan, as one needs to remember a single date instead of multiple dates as in the case of individual plans.
A floater policy makes it easier to add new family members as compared to individual cover, where a fresh policy needs to be taken each time there is an addition to the family. In case of the unfortunate demise of the senior-most member of the family, other members of the family can continue with the floater policy without losing any benefits. In the subsequent renewal, the policy can be renewed with the next eldest member becoming the primary member, and the policy continuity benefits can be availed of as per the terms and conditions of the plan.
However, there are a few risks if you are totally dependent on floater policies. Say for instance, a family has a floater plan for a sum of Rs 2.5 lakh assured. In a situation where the entire family suffers medical emergencies simultaneously (as in an accident), the cover may be inadequate for the family if the total treatment cost is more than Rs 2.5 lakh. Here, the individual will have to pay any amount over the assured sum of Rs 2.5 lakh from his/her pocket. In such a case, an individual cover will prove better as each family member will get reimbursed separately for the amount that they are insured.
Family floaters are recommended for those who are covered by their employers as well, as it helps take care of interim periods between job switches. The cover continues even if you leave the job or retire. Moreover, floaters help you get additional cover. So, suppose the organisation you work for covers you for Rs 2 lakh. Assuming you feel the need for a cover of at least Rs 4 lakh, you can opt for a floater of an additional Rs 2 lakh.
As we have seen, a floater policy does come with a cost benefit when compared with an individual policy. However, this shouldn’t be the sole deciding factor when choosing a plan. You need to consider several other factors too, to figure out which one will suit your needs better. Age would be one of the important parameters to consider. In a floater policy, the cost is governed by the age of the senior-most member of the family to be covered. So, it makes sense for a young family to opt for a floater plan. On the other hand, if your parents are above 60, it is likely that they could have higher claims. Hence, they would be better off with individual plans. Some financial planners recommend having an individual cover first and adding a floater to that.
As people get afflicted with medical issues separately and at various ages, it is always better to have a primary cover first. If you wish to have higher medical insurance as your age increases, you can get a floater plan.
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