Why Adding Parents To Your Family Floater Can Backfire On Premiums

A family floater policy is a good and cost-effective way to get health insurance for your entire family, but does it make sense to include your elderly parents? We take a look.

Why It Is Not A Good Idea To Add Your Parents To A Family Floater Plan 

Adding elderly parents to a family floater plan can drive up the premium sharply because generally the cost of the plan is based on the oldest member. Since the entire family shares one sum insured, parents’ frequent medical needs can quickly exhaust the cover, leaving less protection for the rest younger members of the family.

“It can also affect the No-Claim Bonus (NCB) and make renewals on the higher end. In some cases, age limits can even disrupt the whole policy, as when parents get older, the policy may get terminated or require separate renewal,” says Sarita Joshi, head of health and life insurance, Probus.

The question about the inclusion of the parents in the family floater policy will depend on the age of the parents, their health conditions, and insurance claims patterns.

In retail health policies, the premium is calculated basis the age of the eldest member; hence, inclusion of a parent above 70 years of age would drastically pull up the premium for the entire family. There have been instances of failure to renew the policy just because of the higher premium, and thereby all members lose the extremely important policy feature - continuity benefit.

“Once the continuity benefit is lost, the insurer would restart the pre-existing disease waiting period afresh. Worthwhile it is to note that one large claim pertaining to the parent will wipe out the entire sum insured for the other members as well,” says Milind Tayde, head- employee benefits, Anand Rathi Insurance Brokers.

Thus, premiums rise significantly when parents are added to the floater plan because seniors usually carry higher health risks and often have pre-existing conditions (common with senior citizens). Even if you keep the sum insured as it is, the cover effectively becomes smaller relative to increased health needs. To compensate, most families end up increasing the sum insured to maintain adequate protection, which further leads to higher premiums.

Why A Standalone Policy Works Better 

A standalone senior-specific policy works better when parents are above the age of 60 years or have pre-existing medical conditions, because these plans are tailored around age-related and chronic illnesses.

“It ensures parents get a dedicated sum insured without affecting the family’s coverage or NCB. This setup offers more stable financial protection since frequent claims by parents don’t impact premiums and also acts beneficial for the rest of the family,” says Joshi.

“In simple words, a separate parental policy avoids financial brunt on the insured due to a combined Floater premium loading, it mitigates the risk of sum insured exhaustion and the underwriting level complexities associated with senior citizens’ insurance,” says Tayade.