What are Family Health Insurance Plans?

2024-08-02

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This proverb holds true even for modern nuclear families who are aspirational, independent and optimistic about the future. People are now also more vulnerable than ever given the rise in the incidence of newer ailments caused due to lifestyle modifications, the emergence of newer viruses and environmental changes. Nuclear families have a thin support system unlike the erstwhile joint families wherein family members could step in to help in case someone fell ill.

Rising hospitalization costs are posing to be another challenge for the burgeoning middle-class that is not seeing parity in income growth. In a family having two children, even if one child falls sick, both parents have to be around to care for the child and also manage the household. Even if one of the parents falls sick, the other parent has to take on additional responsibilities to keep the household chugging along. There are opportunity costs also involved thus making healthcare more stressful. Ergo, caring for health is important for everyone in the family and that makes a health insurance plan an essential financial instrument.

Definition: Family Health Insurance

The current situation is sufficient evidence that emergencies can come in anytime and the emergence of new illnesses makes life even more uncertain. No age group is “safe” from unknown illnesses and being prepared to face such adversaries is sensible.

As the name implies, this insurance is an umbrella cover that covers the entire family. It is a single comprehensive health insurance plan with broad features such as preventive health check-ups, cashless hospitalization option, the fixed premium for a longer-term etc.

benefits-of-buying-a-health-insurance-plan1

The umbrella cover offers a fixed sum insured for the family. Managing multiple policies is also difficult and there is a possibility of forgetting premium payments resulting in a lapse of the policy. One single policy is more convenient to manage.

A family cover protects everyone in your family and gives financial protection in times of need and saves you from the dual stress of managing the illness as well as the costs associated with it.

Why do you Need a Family Health Insurance Policy?

There are many advantages of opting for a family health insurance policy. A few good reasons are listed below.

a. Affordability

With spiralling healthcare costs, especially after the onset of Covid-19, family health insurance seems to be a good bet to protect your family because it is also significantly cheaper than buying individual insurance covers for each family member.

b. Convenience

Renewing four policies on four different dates can be cumbersome. Maintaining and updating records can add to the woes. If you have a single policy, you can renew in one go and the chances of forgetting would be much lesser. The insurer may provide you with some add on benefits for opting for a family cover.

c. Tax Savings

You can mention only one single policy for a tax deduction (as against four different policies) while submitting your tax planning file or investment declaration. Amount paid for health insurance coverage is eligible for a deduction under section 80D of the Indian Income Tax Act.

d. Adding Family Members

You do not have to buy a new policy when you have a new addition to your family. The baby’s name can be added to the existing policy. You also have the option of adding your parents or in-laws to family health insurance plans.

e. Add-on Riders

Additional covers for maternity, accidents and/or critical illnesses are also available so that the insured family gets a lump sum amount for incidental expenses apart from reimbursement of hospitalization expenses.

Family Health Insurance Plans Vs Individual Health Plans

Individual Plan	Family Plan
1. Covers the individual 2. Buying multiple individual policies can be expensive 3. All policies have to be separately renewed 4. Separate sum insured for each individual in the family 5. Children below a certain age and newborn children are not covered	1. Covers the family 2. Cheaper than buying individual policies 3. Renew only one policy 4. One single sum insured for the family 5. Additional benefits such as maternity cover (Mediclaim)

Exclusions in Family Health Insurance Plans

The following exclusions generally apply to both individual and family health plans:

1. Pre-Existing Illnesses:

Insurance, by design, covers the risk of something that is unknown yet. Health insurance is financial protection against any illness that may strike in future. Therefore, the question of covering a “pre-existing”, I.e., a known illness does not arise. However, for the benefit of customers, some health insurance policies do cover pre-existing health conditions, albeit, with a reasonable waiting period.

2. Cosmetic Makeovers:

This is a common exclusion that precludes customers from claiming for expenses incurred to undergo a cosmetic change that is not prescribed by medical practitioners. Plastic surgery done only to enhance one’s looks will not be covered but plastic surgery done post an accident may be covered under a health insurance policy.

3. Attempt to Suicide:

Injuries caused due to attempt to kill oneself are not covered in most health insurance plans.

Learn if a life insurance policy will pay for suicidal death.

4. Alternate Medicine:

Treatments availed under Naturopathy, Homeopathy, etc. may not be covered under standard health insurance plans

5. OPD:

Consultations and treatment done in the Outpatient Department are not covered unless these treatments are part of pre-hospitalization or post-hospitalization.

Although exclusions are more or less uniform across standard health plans, the inclusions may vary across insurers, the type of policy, the sum insured and premiums payable. Here is a ready reckoner of what is broadly covered under most plans:

A) Inpatient Hospitalization:

Inpatient treatment covers expenses such as surgery, operation theatre costs, nursing charges, anaesthetist's fee, cost of medicines, blood, oxygen.

B) Pre and Post Hospitalization:

Any consultations or investigations done prior to and resulting in hospitalization is covered under the policy. Similarly, any follow up consultations, medications and investigations post-hospitalization are also covered. Both these expenses are covered only for defined timelines (example: 60 days pre and 60 days post hospitalization)

C) Ambulance:

The cost of ferrying the insured for hospitalization/admission is covered, albeit there could be upper limits in some policies.

D) Day Care:

Nowadays, many treatments do not require multiple days of hospitalization. At the same time, these illnesses are both critical and expensive. Such expenses are covered under health insurance plans.

You can also benefit by saving taxes on premium amounts paid because the premium amounts are deductible under section 80D of the Indian Income Tax Act. This is in addition to the deductions claimed under section 80C of the Indian Income Tax Act.

Scenario 1
Your Age	Below 60 Years
Parents' Age	Below 60 Years
Taxable Income	800,000
The premium for Self/family	25,000
Premium for Parents	25,000
Net Taxable Income	750,000

You can avail of section 80D deductions for your family and parents separately if you pay both the premiums. This is regardless of the fact that you hold a single policy covering all or multiple.

So, for instance, if you have a single-family health insurance cover for yourself, your spouse, children (below 25 years) and parents, you can avail of 80D benefit twice.

Scenario 2
Your Age	Below 60 Years
Parents' Age	Above 60 Years
Taxable Income	800,000
The premium for Self/family	25,000
Premium for Parents	25,000
Net Taxable Income	750,000

Section 80D allows a maximum deduction of up to Rs 25,000 when the insured is below 60 years of age. For insured above 60 years of age the deduction goes up to Rs 50,000. This limit includes preventive medical check-up expenses of up to Rs 5000.

Scenario 3
Your Age	Above 60 Years
Parents' Age	Above 60 Years
Taxable Income	800,000
The premium for Self/family	50,000
Premium for Parents	50,000
Net Taxable Income	700,000

You can claim 80D benefit for the senior citizen (for self or parent) even for the medical expenses for specified diseases.

Needless to say, a family health plan is more comprehensive and more economical as compared to an individual health plan. Moreover, one single plan is easier to manage as against managing multiple policies.

A family health cover relieves you of your stress, provides top-class benefits and lets you live your life peacefully. Investing in a family health plan is important and therefore you should make this decision at the earliest.

Also learn about Income Tax Return

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised to exercise their caution and not to rely on the contents of the article as conclusive in nature. Readers should research further or consult an expert in this regard.