Difference between a group health insurance plan and a regular one

One might assume that the differences between a group health insurance and individual health insurance cover would be simple enough to understand. However, most people are uncertain of the differences between group insurance and individual insurance.

Mumbai: Comparing both these health insurance covers will help you choose effectively, thereby deciding what's best for you.

Though both these insurance policies provide similar coverage, they do differ in the details, sometimes quite prominently. Employers in particular need to assess the need for a group insurance plan, which is usually offered to the employees for both tax and employee benefit purposes.

But before making a choice, it is where important for you as a policy seeker to better understand the differences between group insurance and individual insurance. Let’s take you through the differences between group and individual insurance.

What it means?

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/her family. Though the name suggests otherwise, it isn't always necessary that an individual insurance package covers only a single person.

Cost

Clearly, the premium for group health insurance plans is significantly cheaper and can be availed at low or no cost to the employee. The employees taking employer offered health insurance do not have to pay any additional fees unless they opt for additional benefits not being offered in the group policy.

Moreover, the premium for group health insurance is directly deducted from the salary or at times the employer provides it for free as opposed to individual health insurance plans wherein the premium is paid separately by the policyholder. It is always advised to purchase an individual health insurance plan as the employer's group health insurance package does not always covers specific needs.

Convenience and control

With an individual insurance cover, there may be a scenario when you are denied the insurance for several variety of reasons including medical or financial history. However, the case is not the same with a group health insurance cover as each and every employee of the company is eligible for the insurance cover. This is generally because, under a group insurance cover, the process of underwriting which involves examining medical history is mostly waived off.

However, under an individual health insurance cover, the individual has complete freedom of setting the terms of the policy. The right of discontinuing the policy is only in the hands of the policyholder. One may choose a policy on the basis of individual medical, financial and social situations.

No claim bonus

With an employer-provided group health insurance policy, you do not have the option of claiming no-claim bonus even if you have not made any claim throughout the tenure of the policy.

However, you are always eligible for a no claim bonus in individual health insurance policy provided you have not made any claim during the policy term. No-claim bonus is generally a reward for being healthy and is provided as a discount in the premium amount.

In many cases, if you do not make any claim but another individual covered under the same group policy makes a claim, the overall cover being offered to the group may get reduced only in cases where the employer is unwilling to pay an extra premium.

However, most companies are now getting away with this practice and now offer the same amount of coverage to all employees.

Applicability

While individual health covers are applicable at all times and circumstances, group health insurance plans only offer coverage until you are employed and your employer is paying the premium amount. As you retire/resign from your job, you do not have the choice of converting the group health cover to individual health policy. Moreover, the conversion amount is much higher than that for a new individual life insurance policy.

Keeping such factors in mind, it is always recommended to convert your group cover to individual cover only if the premium amount is low.

(Written by Vaidyanathan Ramani, Head of Product and Innovation, Policybazaar.com)