Family or Individual Health Insurance? Avoid Financial Pitfalls with Smart Planning

Health insurance policies form a financial safety net during a health crisis. But there are many types of health insurance plans available in the market, chief among them being health insurance plans for family and individual health insurance plans. And picking the right plan between these two can make a whole lot of difference for a family's financial situation, besides their health. Here’s how to smartly plan your health insurance journey so that you can avoid financial pitfalls.

What’s the Difference Between a Family and an Individual Health Insurance Plan

Individual Plan

An individual health insurance plan covers the medical needs of the policyholder alone and not their dependents. The sum insured in this case can be used only by the policyholder. The premium amount is calculated based on the age and health status of the individual who wants to be insured.

Family Health Insurance Plan (Family Floater Plan)

A family floater plan provides coverage for members of a family, including the policyholder, their spouse, children, and parents. Some may even extend coverage to the in-laws. Here, the sum insured is shared between all the members. You will only have to pay a single premium for the entire family. It is calculated based on the age and health risks of the oldest or most high-risk member of the family. Family health insurance plans are often the more affordable option when compared to an individual health insurance plan.

How to Pick the Right Plan

Assess

Knowledge is power when it comes to picking the right insurance plan. Knowing where you and your family members stand when it comes to their healthcare needs and wants can give you a clear direction.

For example, the impact of pre-existing diseases and age on health insurance policies can be immense. If you have a young family with no pre-existing conditions or major health concerns, then a family floater plan will serve your needs. But if you have elderly dependent parents with pre-existing conditions, then an individual plan that addresses their needs with a higher sum insured would be the best route to take.

Sum Insured

The sum insured in both plans is used differently. When it comes to an individual health insurance plan, the policyholder gets to use the entire sum insured. But with a family floater plan, the sum insured becomes a common pool that the members can dip into as and when the need arises.

A sudden emergency with one member can take away a good chunk of the sum insured, leaving others vulnerable. This is especially true if you have high-risk members in the family. So, calculate what would be the maximum sum insured that you and your family would need and work with that number.

Premium

A family health insurance plan will have a lower premium compared to an individual health insurance plan due to shared risk. But a lower premium alone should not dictate your choice. A balance has to be struck between premium and protection.
If you have more vulnerable members in the family, it may be wiser to choose an individual health insurance plan for them alone, while the rest can be brought under a family floater. This will ensure that every member of the family gets the protection they need during a medical emergency without having to pay higher premiums for all of them individually.

Financial Pitfalls to Avoid

• Avoid picking a lower sum insured just to save on premiums. With medical inflation on the rise, this can eventually lead to higher out-of-pocket expenses and financial strain.
• Look out for room rent caps, sub-limits on certain conditions, and ICU limits. These have a big impact on how much of the hospital bill you will have to bear.
• Know the waiting period for pre-existing conditions, maternity benefits, and exclusions. If your claim doesn’t meet the criteria set by the insurer, you may end up paying the full hospitalisation cost.
• Keep an eye on your renewal dates and never miss them, as this might lead to policy cancellation. You will not only be left without protection but also lose benefits accrued during your policy tenure.

The smart and financially safe way to navigate the question of whether to pick an individual health insurance policy or a family floater plan is to look at your own circumstances and decide accordingly. Everyone’s health needs are different, and sometimes a combination of these plans can work. But there are instances where a family floater plan or an individual health insurance plan alone can make more sense as well. So assess your needs and make the smart choice.

Moneycontrol Journalists are not involved in creation of this article.