Should you opt for floater cover?

WHAT IS IT?

Floater insurance is a cover for two or more individuals. “It is a big kitty jointly available to everyone,” said Vaidyanathan Ramani, head of product and innovation, Policybazaar.com. Some floater plans restore the sum assured when a second unrelated illness is detected in the family. Say a family of four has a floater cover of ₹7 lakh and uses ₹4 lakh for hospitalisation of one member due to cardiac arrest. The next time an unrelated illness is detected in the family, the leftover sum assured of ₹3 lakh will be restored to ₹7 lakh. There are 10 such plans in the market right now, according to Policybazaar.com.

HOW DOES IT WORK?

Say, for example, a family of four has a floater cover of ₹10 lakh and one member is hospitalised at the cost of ₹2 lakh. In a family floater, the sum assured is reduced to ₹8 lakh, which is then available to the family for the rest of the year. In case of individual covers, the ₹2 lakh will be deducted from the individual’s plan only, not affecting the sum assured or insurance cover of other members. Generally, the maximum age limit for a floater cover is 65 for the senior-most member of a family, although a few plans have extended that limit, said Kapil Mehta, co-founder of SecureNow, an online insurance broking firm.

THE COST

An advantage of floater plans is that it is cheaper than individual covers, depending on age. For example, in a family of four where the eldest member is 35, a spouse is 32 , and two children are 12 and 10, and the household income ranges from ₹10 to 15 lakh. For this family, Max Bupa’s Go Active plan for a cover of ₹ 10 lakh will cost ₹25,204 annually. In case you want to add a member of 5 years of age for the same cover and income, the premium increases by ₹3,538 to ₹28,742 annually. If you take an individual plan, it will cost you ₹ 9,942 annually for each and a new individual plan for a family member will cost you double.