DSIJ Mindshare

Tide Over Medical Expenses With Family Floaters

A family floater can be immensely beneficial and cost effective by bringing the whole family under an umbrella policy for health-related expenses. But is this policy useful for your family’s needs? Jay Sampat helps you understand.

KEY POINTS:

  • If a family consisting of three members – husband, wife and a child – has purchased a family policy with a cover of Rs 5 lakh, any of the three members, individually or collectively, can use the policy up to a limit of Rs 5 lakh.
  • The advantage of better coverage at lower premiums in case of family floater plans gets negated if one of the family members has an adverse health history.
  • Other issues associated with family floaters are the uncertainty regarding the continuity of the policy upon the proposer’s death, and renewal once the seniormost family member reaches the maximum age of eligibility.


The family floater policy has increased the penetration of health cover by bringing the entire family under a single policy cover. Say a family of three – husband, wife and a child – has purchased a family policy with a cover of Rs 5 lakh. Any of the three members, individually or collectively, can use the policy up to a limit of Rs 5 lakh. If one member has used Rs 1 lakh for a hospitalisation bill payment, for example, the remaining Rs 4 lakh cover can be used for the rest of the year. From the next year, the full cover amount would be available to all the members again.

Given the business benefits of family floater policies for insurance companies, it should come as no surprise that they are going all out to promote these. What’s more, since buying a floater policy is cheaper than buying individual cover, such policies have become quite popular with many people. Say a family of four wishes to buy health insurance for the year. Depending on the age of the individual members, a family floater plan for Rs 8 lakh is likely to be cheaper than four individual policies of Rs 2 lakh each, especially in scenarios where just one or two of the four make a claim.

However, the advantage of better coverage at lower premiums gets negated if one of the family members has an adverse health history. For example, if a family member is suffering from a chronic liver or a kidney problem, the probability of regular claims being made is quite high. As a result, the other members of the family would be left with very little insurance cover for the rest of the year. To address the issue of the insurance amount getting extinguished, various companies offer family floaters with unique options, wherein the sum assured is reinstated in individual as well as family floater policies. For instance, Apollo Munich and Star Health restore the cover if the second claim pertains to an ailment unrelated to the first one, or is made by another family member. L&T Insurance’s product promises replenishment of cover in case of accidents and double the sum assured for critical illnesses.[PAGE BREAK]

Other issues associated with family floaters are the uncertainty regarding the continuity of the policy upon the proposer’s death, and renewal once the seniormost family member reaches the maximum age of eligibility. In most cases, the policy will be renewed only till the seniormost member reaches the maximum age of renewability (which, in most cases, is 65-70 years). As it stands today, at that stage, the other family members will need to take a fresh policy without getting the potential benefit of their claims history and pre-existing diseases coverage. The same goes for children who reach the maximum age (which is 25 years in most cases), after which they will need to buy a separate policy. Here, the premiums for the other policyholders come down. In such cases, the exiting policyholder should opt for an individual cover immediately post the expiry.

Most policies also make no specific provision for continuing cover for the surviving family members in case of the unfortunate death of the seniormost member. Experts, however, advise that such fears can be addressed in many cases of the proposer’s death, as other floater members can write to the insurer about seeking to be the new proposer and the cover will continue. Of course, one needs to check fine-print of the policy for the same, as the rules vary from insurer to insurer.

Given the low risk profile of young individuals, insurers will not hesitate to issue policies at cheaper premiums to young families. That apart, if you are dissatisfied with your insurer’s services, your family has an option to switch to another insurer, collectively or independently. Thanks to portability, you can retain your continuity benefits and need not wait for four years to get the pre-existing diseases cover. However, do take time to understand the nitty-gritties of the process, particularly if you are migrating from individual cover to a family floater policy. For instance, if you and your spouse have standalone covers of Rs 2 lakh each and you wish to shift to a family floater of Rs 5 lakh, the continuity benefits will be capped at Rs 2 lakh per person.

Family floater policies provide sufficient coverage for the entire household, particularly for the young and healthy ones. One of the biggest advantages of ‘family-floaters’ is that one can have access to a larger shared cover than that under an individual cover. This is in view of the low probability of all the members of the family being hospitalised in a single year.

In cases where one of the members of a family is susceptible to repeated hospitalisation, a separate cover is advisable for that person. Another option is to look at a floater with a greater cover. A cost-benefit analysis needs to be undertaken to achieve the perfect balance.

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