Family floater policy
A single health insurance policy covering several named family members under one shared sum insured, instead of separate policies for each — cheaper, but the pool can run out for later claims.
In plain language
Buying a separate health policy for every family member is one option. A family floater policy is the other: one policy, one sum insured, shared across the named members of the family.
Whoever in the family falls ill draws on the same pool of cover. That is both the appeal of a floater and its catch: because the sum insured is shared, a large claim by one member leaves less cover for everyone else for the rest of that policy year.
How it works
A family floater works like any indemnity health policy — it reimburses actual hospitalisation expenses, up to sub-limits specified per head (room rent, consultation, medicines) — except that the sum insured is a single, shared figure for every named member on the policy, rather than a separate figure for each.
Because the pool is shared, the order and size of claims within the policy year matters. A large claim early in the year by one member reduces the balance available to every other member for the rest of that year, even if they have not yet made a claim themselves.
The main commercial appeal is cost: insuring several people under one shared sum insured is typically cheaper than buying the same total cover as separate individual policies, because it is statistically unlikely that every member will make a large claim in the same year.
A worked example
The Malhotra family — husband, wife and two children — buy a family floater policy with a Rs 10,00,000 sum insured, shared across all four of them, for the year.
March: Husband is hospitalised for a cardiac procedure, bill Rs 7,50,000
-> Paid from the floater; balance remaining for the rest of the family
for the rest of the year = Rs 2,50,000
October: Daughter needs an appendix surgery, bill Rs 3,20,000
-> Only Rs 2,50,000 of cover remains in the shared pool
-> The family pays the remaining Rs 70,000 out of pocket
Had each family member instead held a separate Rs 10,00,000 individual policy, the daughter's October claim would have been paid in full from her own untouched sum insured — but four separate policies of that size would ordinarily cost considerably more in total premium than the one shared floater.
Why NISM asks about it
Chapter 3 (Features of non-Life Insurance Products), section 3.1.2(b), "Health Insurance," introduces the family floater option immediately after cashless facility, as part of the standard features of a health insurance policy. Expect a question comparing a family floater against separate individual policies, or a scenario question where a large early-year claim by one member affects cover for the rest.
Common exam traps
- The sum insured is shared, not multiplied per member. A Rs 10,00,000 floater for four people is not Rs 40,00,000 of total cover.
- A large claim by one member reduces what is left for everyone else that year — this is the central trade-off tested against individual policies.
- Cheaper premium is the main advantage, not larger total cover.
- Do not confuse a family floater with a top-up or super top-up policy — those add cover above a threshold on top of a base policy; a floater is a single base policy shared across people, not layered cover for one person.
Where this is taught
Free preparation for NISM Series X-BRelated terms
- Critical illness insuranceA defined benefit policy that pays a lump sum when the insured is diagnosed with a specified disease such as cancer, heart attack or stroke and survives a minimum period — no payment on death.
- Day care treatmentHospital treatment covered under a health policy even though the patient is discharged the same day — allowed because modern technology now lets certain procedures skip the overnight stay a policy once required.
- DeductibleThe portion of a claim the insured bears before the insurer pays anything — a fixed rupee threshold that lowers the premium and keeps small claims out of the system.
- Top up policyA health policy that pays hospitalisation expenses above a pre-agreed threshold (deductible) — applied to each claim separately, unlike a super top-up, which applies it to the year's total.
- Fidelity insuranceA policy that reimburses an employer for money or goods lost through an employee's forgery, fraud or dishonesty — taken wherever staff routinely handle significant cash or valuables.
- Sum insuredThe amount specified in a non-life policy that represents the insurer's maximum liability for claims made during the policy period - the ceiling on what the policy can ever pay.