Group Insurance Vs Individual Insurance for Employees

Group Insurance Vs Individual Insurance for Employees

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Given the rising medical costs; buying health insurance is no longer a choice but a necessary move. With it, you can safeguard yourself as well as your family against any medical contingencies. You have the option of purchasing an individual health policy or a group policy. Most businesses provide their employees with group insurance. Many employees feel confused about whether they should have additional individual or personal insurance as well.

Even though both group and individual insurance provide similar cover; there is plenty of differences in their nuances and details. To make things easier, we compare both types of insurances and let you decide to choose either one or both to help you get comprehensive coverage for yourself.

  • Definition

Let us begin by defining the two terms first.

Individual Insurance is a private policy purchased by an individual for himself and his family alone. Contrary to its name, it might provide protection to a single person as well as a whole family. The premium amount is based on the number of people covered, their age, family history, lifestyle, etc.

Group insurance is an insurance package which is often purchased by an organization, big or small, for the benefit of its employees. The organization can purchase a pre-planned package or buy a unique customized plan, built specifically for them.

Comparing Individual Insurance & Group Insurance

Now that we have defined both terms and know that both offer same coverages; let’s highlight the essential differences between the two on various parameters:

  • Cost

When calculated in terms of people covered, group insurance is much more cost-effective than individual insurance. No employee is required to pay any additional fee unless one is opting for some extra coverage not included in the package. The premium is automatically deducted from the salary. In contrast, an individual plan is more expensive but provides tailormade coverage for you and your family. You are required to pay the premium separately on time.  

  • Underwriting process

Usually, in a group insurance policy, the medical and financial history of each employee is not taken into consideration, and you become eligible for coverage right away. Only under some exceptional circumstances, you might be denied a claim. Thus, it’s always easier to get better coverage at lower costs through an organization in a group policy. However, no individual is given the freedom to set the terms of the policy.

In contrast, an individual has to go through a stricter underwriting approval process for an individual plan. All his medical and financial history is closely examined and his policy is subjected to its jurisdiction. For example, a waiting period of three to five years can be imposed for a pre-existing disease before it gets covered under the plan. The premium amount can also go higher based on age, pre-existing disease and various other conditions.

  • Maternity care coverage

Most group insurance covers maternity coverage by default, but this is not the case in an individual plan. You need to opt for maternity coverage separately and pay a slightly higher premium for it as well. You get maternity benefits from three months to six months under a group insurance package which makes it a highly lucrative option.

  • Convenience and control

An employee will not have any control over the group insurance policy. Its terms and conditions are set by the employer or the concerned authority of that organization. In contrast, you would have full control to set the terms of the policy to your needs in an individual plan. Likewise, all employees of an organization are eligible for a group insurance plan by default. But in an individual plan, you might be denied the insurance policy if you fail to meet its specified eligibility criteria.

  • No-claim bonus

The advantage of no-claim bonus is absent in a group insurance plan. You do not get any benefit of not making any claim in a given year. However, in an individual insurance policy, you can reap the benefits of a no-claim bonus as a spike in sum assured or a lower premium amount.

  • Applicability

Individual insurance plans are applicable at all times as long as the policy is active. But, such is not the case with a group insurance policy. It applies to you as long as you are employed with the company. Once you resign or retire; you are no longer eligible for any benefits of the group insurance plan. In some cases, you are given the option to convert your group insurance to an individual policy, but the premium amount goes significantly higher here.

Deciding between the two

With the arguments given above, it is a no-brainer that the cost-effectiveness of a group insurance policy cannot be beaten. However, it does pose you a problem when you are switching jobs or resigning from jobs. At these times, it is imperative that you have an individual policy to meet your requirements. Thus, you can enjoy the benefits of a group insurance plan but cannot rule out an individual policy.