Comparing Individual vs. Family Health Insurance Plans

An injury or ailment can land you in a hospital. Apart from the physical and mental trauma it may cause, it could prove to be a significant blow to your savings. That’s where health insurance comes in. Knowing that you need a health plan for all your family members is important, but it’s a job only half done. The more difficult part is choosing the plan that provides adequate coverage at a reasonable premium. When people shop for health insurance plans, they often come across two standard plans — the individual plan and the family floater policy. It can be quite challenging to pick one. So, let’s understand more about their features and benefits so you can make an informed decision.

Understanding Individual Health Insurance

Individual health insurance is a kind of healthcare plan designed to cover the medical expenses of a single person. The entire sum insured is meant for himself/herself and cannot be availed or shared by any other individual. This means if you have bought an individual health insurance plan for yourself, it will cover only your hospitalisation costs. You cannot add any member to an individual plan but can buy separate individual health policies for each family member, such as your spouse, dependent children, and parents. The health insurance plans can be tailored as per the individual’s requirements.

Benefits of Individual Health Insurance

• Customisable: An individual health insurance plan can be customised according to the person’s age, health status, medical history, etc. If you are young with no health issues, you can opt for basic coverage with a lower premium.
• Tax benefits: You can avail of tax benefits of up to Rs 25,000 in a financial year for the premium paid toward health insurance. If you pay the premium of your parents' health plan, you can claim an additional Rs 25,000 if they are below 60 and Rs 50,000 if they are more than 60.
• Financial security: An individual health insurance plan keeps you financially prepared for any medical emergencies.

Understanding Family Health Insurance

Family health insurance is a type of healthcare plan that covers all household members under one policy. The sum insured is shared amongst all members. So, in case of a medical emergency, any one member can use the entire amount or all members can use whatever amounts they require as and when there is a need. However, the flip side is if one member exhausts the entire sum insured, the other members are left unprotected till the end of the policy tenure. During this period, if there’s another medical emergency, the insured must bear the treatment cost. Family health insurance is ideal for couples or nuclear families. In a family floater, you can include yourself, your spouse, dependent children, and your parents; some insurers also allow parents-in-law to be covered under a family healthcare plan.

Benefits of Family Health Insurance

• Affordable premiums: As there is a single premium for the entire family, it is comparatively less expensive.
• Easier to manage: Managing one plan for multiple members is easier in comparison to several health insurance policies for each member.
• Flexibility to add new members: It is easy to add new members, which can be your parents or a newborn, to the existing family floater plan. All you need to do is inform the insurer and pay the extra premium.
• Tax benefits: Under Section 80D of the Income Tax Act, you are eligible for a tax benefit of up to INR 1 lakh for paying the premium of health insurance for your family. Here's the calculation: For paying the premium of self and family, you can avail of a benefit of a maximum of INR 25,000 if all household members are aged below 60. If the policyholders are aged more than 60, the deduction will be a maximum of INR 50,000. If you are paying the health insurance premium of your senior citizen parents, you get an additional benefit of up to INR 50,000.
• Financial protection: A family health plan shields your finances by covering the medical expenses of your family members.

Individual Health Plan vs. Family Health Insurance Plans

Although both health insurance plans safeguard your finances during a medical emergency or planned hospitalisation, there are some key differences between the two health policies –

1. Individual health insurance plans provide medical coverage to a single person; hence, they have their own sum insured, benefits and premiums. In family health insurance, all members of the family share one plan. The sum insured is shared amongst all members, and there is a single premium.

2. The coverage in an individual health insurance plan is extensive because the sum insured is dedicated to a single person; the plan can be customised as per the policyholder’s preferences. In health insurance for a family, the sum insured is shared by all members. For instance, if a family floater has a sum insured of INR 5 lakhs and has 3 members, the sum insured must be shared by all the members.

3. Individual health plans are ideal for single persons or those with chronic health issues. Family health insurance is best suited for couples or nuclear families.

4. If you buy multiple individual health plans for each member, the total cost will be high. However, family health insurance is cost-effective because there’s a single premium for all family members.

5. One of the disadvantages of family health insurance is that if one member exhausts the entire sum insured, the other members will not have any financial protection during the policy period. In individual health plans, the insured has the entire amount at his/her disposal. So, there’s no risk of financial insecurity.

6. The premiums of individual health plans are based on the individual’s risk profile and age, which means the premium may vary from person to person. On the contrary, family health insurance has a single premium based on the oldest member's age and health profile.

7. For not making any claims during a policy year, you will be rewarded with a no-claim bonus (NCB), which can be a discount on the premium or an increase in the sum insured at no extra cost. If one member makes a claim in a family plan, the accumulated NCB gets nullified. But if each member has separate individual health policies, the NCB gets nullified only for the person who makes a claim on his/her policy without impacting the NCB of others covered under separate plans.

Conclusion

Deciding between individual health insurance plans and a family floater is not such a daunting task if you are clear about the policies and your requirements. What is important is that the plans must have comprehensive coverage and bail you out of a medical emergency when the need arises.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wording and prospectus before concluding the sales.