Family floater vs multi-individual health insurance: Key differences, benefits and challenges

As healthcare becomes increasingly expensive, choosing the right insurance policy has become more important than ever. There are two common approaches, or two types of insurance policies, when it comes to families: A Family Floater plan (family insurance) and a multi-individual health insurance plan. Both of these plans have their own features, benefits and trade-offs.

It’s important for individuals to understand both options, so they can choose the right one for their family.

What is a family floater health insurance policy?

A family floater health insurance policy provides medical coverage to all family members insured under the plan. Under this policy, a single amount covers the entire family, and a unified premium is paid instead of separate premiums for each member.

For example, if you purchase a family floater plan with a sum insured of ₹10 lakh to cover yourself, your spouse and your two dependent children, and you claim ₹2 lakh for a surgery, the remaining ₹8 lakh will still be available for all insured members during the policy year.

Generally, these plans include the policyholder, spouse and dependent children. However, some insurers also allow coverage to be extended to dependent parents or parents-in-law.

What is multi-individual health insurance?

In a multi-individual health insurance approach, families buy separate health insurance policies for each member. Every individual policy comes with its own sum insured, premium and coverage benefits, ensuring independent protection for every insured person.

Key differences

Benefits

Lower Premiums: One of the key advantages of family floater policies is affordability. Since the insured amount is shared, insurers generally charge lower premiums when compared to the combined cost of multiple individual policies.

Convenience: Managing a single policy with one renewal date, one premium payment and unified documentation makes this policy easy to manage.

Flexible coverage: Any insured member can utilise the entire amount if and when required.

Tax benefits: Premiums paid under family floater plans are also eligible for tax deductions under Section 80D of the Income Tax Act, like individual policies.

Dedicated coverage: Everyone covered under the policy has a separate sum insured, ensuring that one individual’s claim does not reduce the coverage available to others. This is useful for families with members who have chronic illnesses or higher medical risks.

Customised policies: Individual plans can be taken according to each person’s health needs, risk profile and coverage requirements. Add-ons can also be taken for some members, such as critical illness benefits.

Independent claims: Claims and renewals are handled separately for every member, which means a claim made by one family member does not impact the premium or renewal of another’s policy.

Challenges

Shared sum insured: If one member utilises a large portion of the shared sum insured, it reduces the coverage available for other members.

Premiums: Premiums are usually calculated based on the age of the oldest insured member, which can make these plans expensive if senior citizens are included.

Age limits: Some policies have age limits for renewal, often between 65 and 70 years, which can complicate long-term coverage for families with older members.

Cost: Buying separate policies for each family member generally results in higher premiums as compared to a family floater plan.

Complex management: Families have to manage multiple renewal dates, different policy terms and separate documentation for the policies.

Which one is for your family?

Choosing the correct policy for your family, between a family floater and a multi-individual health insurance policy, is complex but crucial. While family floater plans are generally more affordable and easier to manage, making them suitable for small families with lower medical risk, multi-individual plans can be more appropriate for families with older dependents and chronic health conditions.

Families can also opt for a hybrid approach, under which they can take both a family floater policy for younger members and individual health insurance policies for senior parents or members with high-risk. For example, if you have a big family, you can take a family floater for you, your spouse and your kids, and a multi-individual policy for your parents.

Ensure that you carefully consider the terms and conditions of every insurance policy, and compare different policies to maximise your benefits.