You'd think that the differences between group insurance policies and individual insurance policies would be simple enough to understand. In truth, however, many people are uncertain of the nuances of group insurance and individual insurance. Comparing these two kinds of health insurance policies will provide you with useful information, thereby allowing you to pick what's best for you.
Yes, it's true that both types of insurance policies provide similar coverage, but they do differ in the details, sometimes quite prominently. Small businesses in particular need to assess the need for a group insurance plan, both for tax and employee-benefit purposes.
In order to better understand the differences between group insurance and individual insurance, and consequently make important decisions concerning it, it is necessary to know what they entail.
Having said that, let's have a look at the differences between group and individual insurance.
Group Insurance is simply an insurance package an organisation buys for the benefit of its employees. The organisation may design a self-insured plan itself or select a pre-planned insurance policy from an insurance company.
Individual insurance is self-explanatory too - it is the insurance package an individual buys for themselves, or for a group of people, such as for his or her family. Though the name suggests otherwise, it isn't true that an individual insurance package covers only a single person.
Understandably, group insurance plans cost less and can be availed at low or no cost to the employee, much like buying in bulk sometimes gets you discounts. Each employee will not have to pay any additional fees unless anyone opts for additional benefits that are not offered to the group. Additionally, premium for group plans is deducted from the salary, as opposed to individual plans wherein premium is paid separately. This is why some may choose not to purchase an individual health insurance plan if they feel that the employer's group health insurance package covers their needs.
Convenience and control
Although not too common a scenario, an individual may be denied the insurance package, for a variety of reasons, be it medical or financial history. However, with group insurance packages, every individual who is an employee of the company is eligible for the insurance package and is automatically granted approval for the insurance package. This is also because with group insurance plans, the process of underwriting, wherein the to-be insured’s medical history is closely examined, is sometimes waived off. Thus, it's a lot easier to obtain an insurance package through the organisation.
However, with individual insurance packages, the individual has full freedom to set the terms of the policy. Only you can choose for the policy to be discontinued. The policy can be decided on the basis of your own personal medical, financial and social situations, rather than spread over a number of individuals like in Group Insurance.
No Claim Bonus
With a group policy, even if you don’t make a claim throughout the tenure of the policy, you, as an individual, do not get any benefit. In contrast, with an individual insurance plan, if you do not make a claim throughout the tenue of the policy, you are eligible for a No Claim Bonus- which can be thought of as a reward for being healthy- and appears in the form of discounted renewal premium or incremental cover at no additional cost.
Additionally, if you do not make a claim but another individual covered under the group plan makes a claim on the ground of having a baby, having contracted a critical illness, etc., the overall cover being offered to the group may be reduced if the employer is unwilling to pay more premium on the group’s behalf.
Unlike Individual Insurance plans that are applicable no matter at all times, Group Plans only offer cover for as long as you are employed and the employer is paying the premium. When you retire/resign, you may have an option to convert the group cover to an individual policy. However, the conversion premium typically is much higher than that for a new individual life insurance policy. So it is advisable to convert only if the premium works out lower than a new policy or if you are otherwise uninsurable. If you decide to convert, you will have to produce the certificate of coverage that your employer had given you under the group insurance policy.
Related: Why do you need Health Insurance?
Which should you choose?
Group insurance plans can be a real cost-saver for the company and the employee, making it more of a bargain, but affordable individual insurance packages are certainly a necessity that even those covered by their companies cannot afford to do without. This is mainly because individual insurance policies allow you to choose exactly what’s covered and what is not. You can decide which critical illnesses and diseases you want to cover- based on your family’s and your medical history, how many members of your family you want to cover, and even how much of a sum you are assured. In contrast, group insurance policies are constructed according to the company’s policies and the will of your employer.
Also, the group insurance cover through your employer only lasts as long as you continue working for your employer. If and when you switch jobs, you may or may not receive health insurance cover from your new employer as it is not mandatory for your employer to provide group health insurance cover. Also, you will most likely not enjoy the same extent of cover as you had with your previous employer.
Lastly, you may find it difficult to get an individual health cover post retirement (if you don’t already have one), especially if you have developed any health issues. Even if you do get covered, the premium for such policies will invariably be quite high.
For the above reasons, it is advisable to get yourself an individual health insurance cover even if you are covered under a group plan through your employer.
Once you have decided to opt for an individual plan, it's important you do your research, obtain the best quotes and make comparisons. You can consult an expert if necessary. After all, it's your money that's going to make the purchase and your health at stake.
A pre-existing medical condition should not be a deterrent for buying your family health insurance and securing their financial future. However, proper disclosure and some precautions ensure that in case if any unfortunate event, you have a smooth and hassle free experience.
A steep rise in maternity expenses over the years is forcing couples to look for options to fund this expense. Those buying maternity policies should understand the terms of these policies.
A health insurance policy is a critical piece in the overall puzzle of a family’s personal finances. A claim free year does not mean that the money goes down the drain. These covers should be treated as pure risk covers where the return is peace of mind of having secured family’s financial position.
Health and critical illness are separate categories and each has its own place in a consumer’s insurance requirement. Here’s a simple guide to knowing how to choose between the two, or decide if you need both.
Buying a health insurance policy is always a matter to consider carefully, and it’s essential you do your research to find a policy that is customized to your needs.
With age, your needs increase for this its important to pick the right cover for your life stage. Reviewing your plan at different stages can ensure you get 360° protection.