Differences between Group and Individual Health Insurance

Having a health insurance policy is essential for everyone as it covers the rising costs of healthcare. There is a wide range of comprehensive health insurance plans, but broadly speaking, these can be categorized into individual and group health insurance policies.

Although both types of policies offer the same basic coverage, there are differences between group insurance and individual insurance. Comparing these two types will help you decide what’s best for your needs.

Read along to find the important distinctions between these two categories. 

 

How Do Group Health Insurance Policies Work?

 

Group health insurance refers to an insurance policy package that a company buys for its employees as an employment benefit. Companies can get a customised insurance plan or buy a pre-planned policy from an insurance provider. Associations, business groups, housing societies, and alumni groups can also buy such policies to offer an incentive for new members.

 

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Usually, a group health insurance policy offers a fixed sum insured covering the cost of hospital bills, treatment of specific diseases, accidental hospitalization, etc. Some employers may also offer coverage for family members. Its inclusions and sum insured depending on the salary package offered by different employers. 

 

The premium for these health insurance policies depends on the cumulative risks of all members. When comparing group insurance vs individual insurance, one can find that group insurance policies are cheaper. It is beneficial for employers as purchasing individual policies for their employees would be too expensive.

 

How Do Individual Health Insurance Policies Work?

 

It is a health insurance policy that provides coverage for the medical expenses of one person. Such plans offer a sum insured based on an individual basis and can be customised as per your needs and requirements. 

 

The coverage amount and premium of personal health insurance plans depend on the insured person’s age, medical history, family’s medical history, and so on. Other factors such as employment and association do not affect the premium amount of such policies. 

 

Most individual policies offer coverage for pre and post-hospitalisation expenses, road ambulance services, daycare procedures, alternative treatment, room rent, surgery costs, etc. You can also buy additional benefits called riders to increase your health insurance coverage. 

 

Thus, a key difference between individual and group insurance is that the former depends completely on your needs. You also do not have to share the sum insured, as in the case of family floater plans and group health insurance plans. 

 

Key Differences between Group Insurance and Individual Insurance Policies

 

Let us consider the following factors to see how group and individual health insurance plans compare:

 

    • Cost: Group health insurance policies usually come at little to no cost for the employee. They are cheaper than individual health insurance plans as employers can get them at a discount for buying in bulk. 
    • Applicability: Group insurance policies only work as long as you are employed and your employer pays the premium. You can convert the group cover to an individual policy when you move out of the company. However, sometimes the conversion premium is higher than a new individual policy. 
    • Convenience: Sometimes, people with health issues may find it difficult to find a health insurance plan. However, group insurance plans cover any employee of a company as their underwriting is sometimes waived off. 
    • Freedom to choose: Another difference between individual and group insurance is that the former allows you full freedom to choose the terms. You can decide which provider and policy you want based on your personal, medical and financial situation. With group insurance, the terms depend on your employer.
    • No Claim Bonus: With group insurance, you do not get any benefits if you do not claim in a year. Individual health insurance policies offer a no claim bonus (NCB) for not making claims, offering discounts on premiums or additional benefits.

 

The following table summarizes the key differences between group and individual health insurance plans:

Basis of Comparison 

Group Health Insurance

Individual Health Insurance

Who is insured

An insured person and his/her family members

The policyholder

Purchaser

Your employer

The policyholder

Premium amount

Deducted from your salary Paid as per your choice

Sum insured

Usually lower than individual health policies

Option to choose a higher sum insured

Coverage Uniform coverage for all employees (the employer decides the amount)

The policy buyer has full control to choose their coverage amount.

Policy duration

Till the employee leaves the company or retires

Up to the exit age (depends on the insurer)

Option for riders

Limited or none

Policyholders can buy any rider benefit

No claim bonus

Non-Applicable 

Available

Coverage for pre-existing diseases

From the first day After the end of the waiting period
Tax Benefits None

Available under Section 80D

 

Group Health Insurance vs Individual Health Insurance — Which Is Better?

 

Group health insurance policies can be an efficient cost-saver for a company and employees as it is offered at bargain prices. That is why many people, especially those with financial problems, end up relying on their group health insurance policies.

 

Another advantage of these policies is that you can get coverage for pre-existing conditions from the first day. However, you will only be insured as long as you are employed in your current company. Once you leave or retire, you will need to get an individual health plan or a new group plan. 

 

In comparison to group insurance plans, individual insurance policies provide more flexibility in choosing the terms of the policy. You can choose what’s covered and what’s excluded. Besides deciding if you want critical insurance coverage, you can choose the sum insured, family members to cover, etc., depending on your needs.

 

Another reason to opt for individual insurance early is that it is difficult to do so after retirement when your group insurance runs out. So, you can do your due research to choose an insurance policy that you like. Some people choose to have both, with group insurance serving as a backup. 

 

Why Do You Need a Health Insurance Policy?

 

Here are some reasons why you will want to have a health insurance policy for yourself and your family:

 

  • To protect your savings

 With every year, the cost of medical treatment, doctor’s consultation, medicines, diagnostics, etc., increases. To avoid draining your savings in one go in case of a medical emergency, you will need a health insurance policy. Many providers offer cashless treatment, so you do not need to spend much out of your pocket.

 

  • Pandemic woes

The COVID-19 pandemic has demonstrated how healthcare problems are unpredictable. Such events and the rising cost of healthcare make it extremely difficult for most families to afford high-quality treatment. A health insurance policy offers financial protection for times like this.

 

  •   Dealing with lifestyle diseases

A shift in our lifestyle has made us prone to diseases such as obesity, diabetes, heart illnesses, respiratory problems, etc. Some of the contributing factors to these diseases include a sedentary lifestyle, unhealthy eating habits, pollution, stress, etc. A health insurance policy can cover all future costs of healthcare and regular medical tests.

 

  •   Dealing with medical inflation

As healthcare technology improves and inflation increases, the cost of treatments also increases. It results in consumers spending their savings, which impedes their future goals. Having health insurance allows you to have affordable healthcare while not needing to worry about the rising costs. 

 

  •  To safeguard your family

While you may be keeping yourself in good health, your ageing parents are more vulnerable to illnesses. For them and your children, you will need to get medical coverage. This ensures that your family gets the best treatment. 

 

The Bottom Line:

 

The differences between individual and group insurance policies show the pros and cons of investing in them. Having a group health insurance policy is quite helpful for anyone looking for basic coverage.

Depending on your requirement for financial backup, you can get an individual health plan over the coverage offered by your group plan. 

 

Frequently Asked Questions

 

  •  What are the benefits of offering group health insurance for employers?

Employers offer group medical policies as a benefit to ensure their employees’ loyalty and retain talented employees. It also serves as motivation for employees to work harder. As buying individual health insurance policies for every employee would be too expensive, companies opt for these group health insurance policies as they are cheaper.

 

  •  What are some of the benefits of group health insurance policies for employees?

The following are some benefits of a group health insurance policy for employees:

    • It is beneficial for anyone who cannot afford to pay regular premiums. 
    • Getting a group health plan is hassle-free, as an employee gets its benefits automatically upon joining. 
    • There is no waiting period for specific illnesses.
    • There is no mandatory requirement for pre-medical screening.

 

  •  Are there any tax benefits for paying health insurance premiums?

Yes, Section 80D of the Income Tax Act offers tax deductions for paying medical insurance premiums. Individual or HUF (Hindu Undivided Family) taxpayers can claim deductions of up to Rs. 25,000 for paying premiums for self, family, and children. 

An additional Rs. 50,000 deduction can be claimed for parents who are senior citizens. If you are a senior citizen, you can claim an additional deduction of Rs. 25,000 for your health plan.

 

  • What is the waiting period clause in health insurance policies?

The waiting period clause stipulates that you cannot claim all the benefits of your health insurance policy for a specific amount of time. This period is called the waiting period, and its conditions vary from one insurer to another. There are various types of waiting periods, including the initial waiting period, pre-existing disease waiting period, and disease-specific waiting periods.

 

  • What are some of the common exclusions of individual health plans?

Most individual health insurance policies do not cover the following:

    • Self-inflicted injuries
    • Cosmetic treatment
    • Obesity treatment
    • Dental procedures
    • Alcohol or drug abuse
    • Treatment for infertility
    • HIV/AIDS
    • Congenital external anomalies
    • Injuries from dangerous sports
    • Illness/injuries due to war, terrorism or nuclear perils

 

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