Disadvantages of Family Floater Health Insurance Policy
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As you are already aware, a floater policy is where a single mediclaim policy covers multiple people. They are usually family members, with a policy having a fixed Sum Insured. While in certain cases a Family Floater is a value-for-money plan provided by health insurance companies, there are situations when this choice can be a little disadvantageous.
Disadvantages of Family Floater Health Insurance Policy
The following are the disadvantages of family health insurance cover:
1. Single Large Claim for Family Floater Health Plans
The biggest disadvantage of a family floater Mediclaim policy is that it can get exhausted by a single member leaving no room for claims in case another gets hospitalized and this could lead to huge out-of-pocket expenses for remaining family members. This scenario is quite likely if one of the members is in a high-risk group due to age, working conditions, etc. For example, if a family floater includes an elderly parent and/or a spouse working in an underground coal mine.
It is also to be noted that in cases like the one cited above, the premium is often high as it is based on insurance concepts such as “loading” which takes into account the highest risk factors. If in such cases, the high-risk individual opts for a separate coverage then if the rest of the family, which is relatively low risk, gets a family floater, it may be economical for the family when it comes to the overall premium.
2. Multiple Smaller Claims of Family Floater Plans
Another disadvantageous scenario of family floater plans is when there are multiple smaller claims that individually don’t exceed the sum insured but the overall amount is much greater than the sum insured for the floater health insurance plan.
Let us take the current Covid-19 crisis, as an example. Multiple members are incurring
hospitalization expenses in the same policy validity time period, in quite a few cases.
Let us consider a household with a family floater Mediclaim of Rs. 6 lakh Sum Insured.
4 of the families filed hospitalization claims
- Member 1 filed a claim for Rs. 3.5 lakhs
- Member 2 for Rs. 1 lakh
- Member 3 & 4 for Rs. 2 lakhs each (totaling Rs. 4 lakhs)
Net claim – Rs. 8.5 lakhs
Out-of-pocket – Rs 2.5 lakhs
However, if the family had insured each of the members with an individual sum-insured of Rs. 2 lakh each, they would have ended up paying Rs. 1.5 lakhs as an out-of-pocket expense, only for the claim exceeding the sum insured. The policy premium could be greater for individual plans, but the difference in out-of-pocket expense in this case suggests that individual coverage, in this case, would have been a better option.
3. Renewability of Family Health Insurance Plans
Some family floater Mediclaim policies have a maximum renewability age. When older parents who are part of the same floater plan reach a certain age, then they are at risk of losing coverage. There are chances of the entire plan not qualifying for renewal. This can increase financial liability due to increased premiums and also lead to loss of accrued benefits. However, in recent times insurance providers are offering lifelong renewability for such cases.
Conclusion
Family floater plans usually have a lower premium for the same sum insured considered on an individual coverage basis. Factors like family composition, life stage of members, health risks, etc. need to be carefully examined. Splitting coverage between individuals and floaters can be a better solution at times. Otherwise, a single floater for the entire family may end up being expensive.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.
