They differ in certain other details that you as an individual should consider. Small companies looking for group health policies for their employees should also assess these polices especially with regard to employee and tax benefits.
Confounded with which type of policy will suit your need? Understanding these policies first hand will give you a better understanding of what these policies are, how beneficial they are and if its meant for you.
Let’s first understand what individual health policies and group policies are:
Individual Health Insurance Policy:
As the name itself suggests, these are policies for the individual investor. The individual investor can purchase a policy for themselves or for their family, depending on their requirement. Although individual policy does suggest that the insurance package is for a single person (insured), it could cover a small group of people (the insured’s family).
This is a complete package a company purchases to insure its employees. Group policies can be tailor made to suit the company’s requirement or the company can choose a pre-defined group health insurance plan.
There are a few differences that set these two policies apart, knowing them will help you understand them better.
Cost Factor- Unlike group policies, premium for individual policies are much higher. The premium is borne by the individual. Group policies are cheaper as they work on the same principle, which is; bulk purchases always attract huge discounts. Since group policies are what company’s choose for their employees, the premium is subtracted from the employees salary.
Convenient purchase - Before the insurance policy is approved, the individual usually has to undergo medical tests and their financial history is scanned. The insurance company can deny the individual the policy citing either medical reasons or unhealthy financial background. On the other hand, group polices are much easy to attain. Since these are purchased by the company, there is minimal medical and financial thresholds to be met.
Flexibility - In an individual policy the policy holder has complete control on how they would like their policy to work for them. The individual can choose their policy terms as well as choose to terminate the policy when found appropriate. Whereas, in group policies the individual has no choice but to accept the predefined plan that the company chooses. The policy terminates when the employee leaves the organisation.
No claim Bonus - If the individual policy holder does not make a claim on their policy through the entire tenure, the policy holder receives a No Claim Bonus. This is how the insurance company rewards the individual for living a healthy life. The bonus can be an increased cover at the same premium cost or discount on premium that is renewed. Group health insurance policy if unclaimed does not give the insured any benefit or bonus.
After Retirement - Your group policy is beneficial only till as long as you are associated with the company. Post retirement you do not receive any benefits, as in health coverage or monetary benefits for you and your family. Individual policy premiums are much higher and this is because the policy gives the individual enough cover even after retirement. However if your group policy is excellent you can always convert it to an individual policy. The premium on your policy post conversion will increase.
It goes without saying that although group polices are excellent for companies, it is advisable that individuals buy their own policy bereft of the organisation they work in. An individual policy is a necessity as it gives you complete coverage as well as takes care of your family’s financial need after your death.
The individual policy also helps you design your policy as per what you want as coverage, premium payment, critical illness covered, number of family members covered, etc.
For those contemplating on buying an individual policy as they already have a group health insurance policy, we recommend you take the plunge. An individual policy may eat into your income a bit, but the benefits are too hard to ignore.
You can choose an individual health policy that suits your requirement along with having a group policy as your individual policy will continue post retirement or change in company, unlike your group policy.