Factors to consider before buying health insurance for family

Ganesh Chaturvedi is a 35-year-old father of two and is self-employed. He also supports his parents who live with him. Ganesh has been considering buying a health insurance policy to cover the medical expenses of his family. He thinks that at this stage only his parents need health insurance since both of them are diabetic, while the rest of the family is in good health. He is also considering buying a family floater health plan, which he believes covers the entire family for a low premium. Is Ganesh set to take the right decision?

Ganesh needs to make two decisions. The first is whether his entire family needs insurance or only his elderly parents, and the second is the type of health policy that he needs. Apart from health insurance for his parents, Ganesh should also cover himself and his family. While they may be enjoying good health now, a sudden illness or an accident can result in big medical bills that can strain their finances. Since the family is young and healthy, the cost of the cover will be low. Another reason to start early is that a record of uninterrupted health cover makes it easier to get insurance when one needs it the most, that is, at a later stage in life.

The next decision Ganesh has to make is the type of policy he should take. He has the option of buying a floater scheme, which will cover his entire family, or take individual health policies. While the floater policy will give him the advantage of covering his entire family at a low premium and offer a larger cover, it comes with certain drawbacks. The most important one is that the premium will typically depend on the age of the oldest member, who, in this case, is Ganesh’s father. Hence, the premium will be higher. Taking a family floater policy has an additional problem that it terminates on the demise of the primary insured person.

So, Ganesh should consider insuring his parents separately with individual health policies so that they are adequately covered for their particular requirements. For himself, his wife and children, a low-cost family floater policy will work just as well since they are young and healthy. His decision should not be based on cost alone, but also on the flexibility of the policy to tailor to their specific needs.

(The content courtesy: Centre for Investment Education and Learning (CIEL))