Expert advice

Nov 05, 2012,15.46 IST

Why individual mediclaim is better, explains Roongta

Harshvardhan Roongta of Roongta Securities believes that if the difference in the premium of a mediclaim policy for a family, where each individual is covered separately is not large than the premium of a family floater policy, it is beneficial to buy the policy which has individual cover.

Below is the edited script of his interview with CNBC-TV18's Latha Ventakesh and Reema Tendulkar

Q: The last time we discussed mediclaim policies, could you elaborate a bit more on that. How does a person decide whether they should go ahead for individual policy or perhaps a family floater plan? What are the costs which are associated with each of them? Could you also give some examples of two typical families - one a young family and another one with older parents and illustrate which one works better?

A: An individual mediclaim policy is one in which each individual member of the family has an independent cover for himself. For example one where each member is covered for Rs 5 lakh whereas in a family floater policy Rs 5 lakh is a floating cover given across to all the four members of the family.

To take a proper example, if we have a family of a husband, wife with an average age 40 years and two children who are below 18 years of age. In an individual policy of Rs 5 lakh cover, for each member of the family independently, the premium will be about Rs 18,300 plus service tax. For a family floater, which means Rs 5 lakh cover, which is common floating across all the four family members, the premium will be about Rs 15,500 plus service tax.

So, looking at the above example we can see that family floater policies are cheaper by about 15-20 percent. But the point to be considered is that the Rs 5 lakh cover is floating across all the four members of the family. What is the implication of this? The implication is that if any one member of the family is hospitalized and consumes Rs 3 lakh of the cover, then a balance of only Rs 2 lakh is left for all the other three members of the family, to be utilized for the rest of the year.

Q: Just to counter that point, could it not be argued that even though we take mediclaims for every member of the family, at least in my personal experience not all of us go to the hospital in a year or sometimes in years, so doesn’t it not make sense to have it for all of us and it floats. At the most only one person really uses that kind of money. So would not the family floater therefore make more sense?

A: You are absolutely right. There are certain instances although rare in nature, like if a family is travelling together meets with an accident, then certainly all members will be hospitalized. The point I am trying to make is if the difference is not very large in absolute terms like I mentioned in the example where the difference is only Rs 2,800 per annum. Although 15-20 percent may sound large but if you take in absolute terms, it is Rs 2,800 per annum. So the question is do you want to save that Rs 2,800 and jeopardize the option of having independent cover for each member of the family.

There are other points as well. The premium in a family floater is computed keeping in mind the eldest member of the family. So, in this particular family setup, the premium that the kids are paying is computed based on the parent’s age.

Taking the example of family with aged parents, now if this couple who is of 40 years, includes their parents who are around 60 years, in the family floater then the entire group pays the premium considering age of the 60 year because that is the age of the eldest member in the family. The likelihood of an aged member being hospitalized is very high because of the age then entire family is left without any cover.

So to sum up, if the difference in the premium is not very large, in this case it is Rs 2800 then it would certainly make more sense to go for independent cover and be rest assured that even if in the rarest of rare cases where the entire family because of some illness or some water borne diseases where the entire family is hospitalized together, you have independent covers without any effect on the other members being hospitalized.

To mention some other smaller point where there is a no-claim bonus given if any one member ha not made any claim. His cover enhances by another 5 percent in the coming year. So, Rs 5 lakh cover in the next year would become Rs 5.25 lakh. Now, these smaller benefits are also not available with the family floater.

My suggestion would be again just to reiterate if the difference is not great in absolute terms please do consider an individual mediclaim policy otherwise if you think that the difference is large then an individual could look at a family floater also.

Q: My question was not that the cover is large it is just that it remains unused in my case most of the times and therefore if the option is one of the four will use it, the chances of us using it is slightly higher in the family floater case, wouldn’t that be the case?

A: For a mediclaim policy if you have a cover, and you make a claim you have to thank god and if you have a mediclaim policy and you have not claimed it you have to thank god even more. So, you should be happy you have not used your mediclaim policy.

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