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Difference between individual and group insurance plans

Insurance is compulsory, whether you opt for a group plan or an individual plan. A lot of people rely only on their group insurance plan, while others view this kind of insurance cover only as a back-up plan for their individual cover.

November 14, 2013 / 11:58 AM IST

Deepak Yohannan
myinsuranceclub.com

Insurance is compulsory, whether you opt for a group plan or an individual plan. A lot of people rely only on their group insurance plan, while others view this kind of insurance cover only as a back-up plan for their individual cover. Though both the kinds provide the basic coverage, there are some very prominent differences between individual and group insurance policies. While group insurance may cost you lesser, individual insurance will provide a greater and more comprehensive protection. Take a look here to understand the basic differences between group and individual insurance plans.

How does a group insurance plan work?
Group insurance is offered to the employees of a company as an employment benefit. Group insurance can also be sought by an alumni group, members of an association, and so on. The members of the group are provided a certain fixed and uniform cover. The cumulative risk of all the members is considered while deciding upon the premium amount. The logic here is that in a group some members would be less likely to make a claim than the others. So this balances the risk factor to a great extent. The members are covered till the time they are a part of the group (employed in the company, part of the association, etc). The coverage is removed when they leave the group.

How does an individual insurance plan work?
This type of a plan caters to an individual and is customized as per his needs and requirements. Specifications related to the individual like age, health, family medical history, etc are considered while determining the premium amount. The policy is valid for the time decided by the policyholder and is not dependent on any other factor like employment, association, etc. The premium rate is fixed at the time of buying the insurance. You can buy additional benefits (riders) depending on your needs. In other words, you have a lot of freedom to cover exactly what you want in an individual insurance plan.
The main differences between individual and group health insurance
To further understand the differences, take a look at the table below:

Group InsuranceIndividual Insurance
The insurance contract is drawn in the name of the group. You cannot use the policy for purposes such as loans, etc. You have a contract in your name. It can serve as an asset and allows you to apply for loans, etc.
Your coverage can be controlled and even cancelled by the provider. Only you can choose for the policy to be discontinued.
A group policy cost is less expensive. You pay more for an individual plan.
Medical tests are not mandatory for a certain amount of cover. If you want coverage beyond that, you may have to undergo tests. Medical tests are almost always compulsory before buying an individual insurance policy
Premium deducted directly from salary. Premium has to be paid individually, at stipulated times.

Group and individual insurance plans are both beneficial and they have their own pros and cons. While having a group insurance policy is very desirable, it would be wise to have some individual coverage as well. The latter gives you a lot of independence and you don’t have to depend on a particular membership for your insurance needs. So maintain a balance of both these kinds of insurance and you would surely have the maximum protection possible.

The author is the CEO of MyInsuranceClub.com, an online insurance price & features comparison portal.

first published: Nov 14, 2013 11:58 am

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