Life insurance: Individual vs group, merits and demerits
Both, individual life insurance and group insurance plans, come with their own set of features and advantages and disadvantages
A life insurance policy is generally considered as an essential part of long-term financial planning. Life insurance also gives one peace of mind since it is about securing his family financially.
In India, life insurance is broadly classified into two types – regular individual life insurance policy and group life insurance policy.
Individual life insurance
As the name suggests, regular individual life insurance is purchased by an individual and he or she can include their family member under the plan. You can select a policy according to your needs and will continue till the time of your retirement, or even sometimes later.
The premium for such policies depends on the type of policy purchased, the policy term, and the sum assured.
Group life insurance
On the other hands, a group life insurance policy covers a group of people. It is generally issued by the employers.
It provides a cover to all the employees in the company under a single plan. All the formalities during the purchase of life insurance are completed by the employer. So, a group policy is available only when you are employed.
Individual vs group life insurance
Both, individual life insurance and group insurance plans, come with their own set of features and advantages and disadvantages. Take a look on differences between these two:
Price: Group plans are more economical as opposed to individual plans. You need not to pay the premium separately. A small amount is deducted from your income as premium of the policy.
Flexibility: An individual life plan provides you the freedom of choosing coverage amount, riders, premium payment mode, etc. But a group life insurance policy does not give you any of these flexibilities. The employer and the insurance company decide the terms and conditions.
No claim bonus: In the regular policy, the insurance company offers no claim bonus for every claim-free year. But, under a group insurance policy, you don’t get any benefit for a claim-free year.
Coverage: The amount of coverage under a group plan is limited as per the terms and conditions as determined by your employer. Such a limitation is not applicable when you buy an individual life insurance plan.
Policy validity: Since the employer offers the group life insurance policy, you can enjoy its benefits only until you are employed with the company. However, the regular policy remains valid for long as you keep paying the premium and renewing the policy.