A life insurance plan is essential for most people’s long-term financial strategy. They may also believe that purchasing a life insurance plan will secure the livelihood of their dependents. A life insurance plan can counter any financial instability in the event of the loss of their beloved ones in an unexpected death. Nowadays, most companies offer group term coverage as an employee benefit. However, the difference between individual life insurance and group term life insurance can sometimes get confusing! Here’s what you should know.
What is Individual Life Insurance?
An individual life insurance policy is a plan paid for and covered by a single individual. A life insurance policy is an agreement between a subscriber and an insurance provider. The insurer agrees to pay a sum of money in exchange for an amount of premium after a specified period or when a covered individual disappears. Life insurance provides financial security for you and your household. Some plans additionally include extra add-ons, including critical illness coverage, accidental death coverage, and others.
What is a Group Term Life Insurance?
A group life insurance plan is a form of insurance coverage that provides life insurance coverage to a team of people under one policy. It gives financial assurance to beneficiaries if something unfortunate happens to the insured individual throughout the coverage term. A group insurance policy is a master agreement. No matter how many individuals are insured, a single group admin maintains the contractual connection between the company and the insurance provider. They are the one who chooses the amount of the money insured, and the premium amount is paid appropriately. This also implies that no particular underwriting is necessary, and new team members can join at any time during the year. However, some insurance companies may ask for Digital Health ID cards before offering coverage.
Individual Life Insurance vs Group Life Insurance
Here is a breakdown of the differences between individual life insurance and group life insurance policies.
Group life insurance policies cover more individuals and provide similar benefits based on the company’s terms and conditions. Group insurance coverage is typically less expensive. It may utilise a little sum deducted from your paycheck to fund the coverage.
On the other side, an individual life insurance plan purchased by you may be more expensive, but it is personalised to your specific requirements and may include additional advantages. The sooner you get individual insurance coverage, the lower your premium.
- Policy Flexibility
Group life insurance is not for everyone. Group life insurance offers a standardised package of coverage and benefits for a specific group or association of people. If you’re looking for a flexible policy that can be custom configured to your needs, individual life insurance could be the right choice. Individual life insurance plans offer several add-on coverages to boost your base insurance cover. Add-ons include critical illness coverage, accidental death coverage, premium waiver coverage and other riders.
An NCB or no-claim bonus is a monetary incentive for policyholders through their life insurance plan. It is a modest method in which the insurance provider celebrates the insured for a claim-free year. If zero claims are filed during the prior policy duration, the insured receives a monetary reward under this incentive. A claim-free year is not rewarded under a group term life insurance policy. If you do not file a claim throughout your life insurance plan, you will be entitled to a renewal and increased coverage at a reduced price. Employee-sponsored programmes do not provide such advantages.
Your coverage can be portable with an individual policy because it may continue even after changing jobs or retiring. If you are thinking of taking a break from your job, but have health insurance coverage through the company you work for, check with your employer before your final decision. Some may cause a lapse in coverage under your employer-sponsored life insurance plan. It is important to understand what type of leave you are applying for, when it begins and ends, and how it will affect your coverage.
The issuing insurance provider cannot terminate a personal life insurance policy unless you refuse to pay your payments on time. A group life insurance plan, on the other side, may be cancelled by your company or the insurance provider for reasons like as insufficient cash in the fund or failure to satisfy their membership criteria.
Group term life insurance is a simpler life insurance plan that requires less paperwork and offers more affordable coverage. The plans get their name because they cover an entire group of employees. Employers can thus easily bundle in these services, with employees being automatically opted in after an initial period. However, group life insurance does have its downsides. Since the coverage is for a whole group, it usually does not suit the needs of individuals. On the other hand, individual life insurance plans let you choose how much coverage you want and choose what your beneficiaries will receive. These policies are thus more flexible to purchase than group plans and more easily suited to an individual’s finances and needs.