Individual Health Insurance vs Group Health Insurance
- Author :
- TATA AIG Team
- Published on :
Choosing a health insurance plan for you or your family can be arduous. It takes hours of sifting through insurance providers, the insurance plans themselves, policy terms, the exclusions under those policy terms, premiums, and so much more.
Generally, when it comes to medical insurance plans, they can be divided into two types: group health insurance and individual health insurance. Once you understand their differences, it will be easier for you to select plans under either category. We have also provided a table below for quick reference.
What is Individual Health Insurance?
An individual health policy is a medical insurance plan that covers the individual policyholder's medical expenses like treatments, medication, or hospitalisation. It is a contract between you and the insurance provider. The insurance company promises to pay your medical expenses in exchange for a monthly premium.
However, these medical expenses must be included under your policy terms if you want the insurer to cover their costs. Only one person can be insured under an individual policy, and individual plans can be purchased for yourself, your spouse, or your parents.
What is Group Health Insurance?
As the name suggests, group health insurance provides medical coverage for a group of people. These plans are usually more affordable because the insurance provider's risk is spread across multiple policyholders.
A group policy is usually bought by company employers or members of an organisation or group. For example, a family-floater plan would also fall under group insurance. The only requirement to be included under a group health insurance plan is to be a permanent member of the group.
For example, company employees would be covered under a group plan as long as they work under the company, and the plan ceases to be valid if they terminate their employment.
In the case of family floater plans, you can add or remove family members at any given point during the policy term.
What Is The Difference Between Group And Individual Health Insurance?
- Prerequisites: The prerequisites for health insurance for group vs individual plans are quite different. For individual plans, anyone over the age of 18 can opt to buy one. However, if you want coverage under a group plan, you must be a permanent member of a group or organisation.
For example, you can be the policyholder's family member, spouse, or employee under a company.
- Sum Insured: Regarding individual health insurance vs group plans, individual insurance usually provides a higher sum insured. This is because, under individual plans, you can opt for add-on covers to increase your sum insured amount, which increases your coverage. In contrast, this is not possible with group plans unless your employer or policy administrator chooses to increase the coverage amount.
- Coverage: If you suffer from chronic conditions and require treatments or hospitalisation, it's best to choose an individual plan as it provides more coverage.
A group plan can only give limited coverage, so it may only be able to cover some of the costs. Furthermore, group plans offered under companies do not offer coverage after retirement.
- Flexibility: Regarding flexibility, in the individual vs group health insurance debate, individual plans offer far more flexibility. This is because only one person is covered under the plan, making it easier to customise their policy features, like their premium payments, policy coverage, etc.
- Premiums: Individual health insurance plans usually have high premiums due to their increased coverage. Group plans, on the other hand, have lower premiums. This is because the risk is spread across multiple individuals, and the employer almost always bears the premium.
Group plans can also benefit people from lower-income groups as it allows them to gain the same coverage as people from higher-income groups.
- Pre-Existing Illness Coverage: You are covered from day one under a group plan. However, individual plans usually have a 2 - 4 year waiting period if you seek pre-existing illness coverage. For example, Tata AIG has a waiting period of 3 years.
- Renewability: Individual plans come with lifetime renewability. This means insurers can not reject the renewal of your policy without a valid reason (e.g. fraud, false claims, misrepresentation, etc.). This is especially beneficial for senior citizens.
In contrast, group health insurance is terminated or ceases to be valid if you are no longer a group member or an employee of a particular company.
Which Offers Better Tax Benefits — Individual Vs Group Health Insurance?
Tax benefits are one of the most prominent benefits of health insurance plans. However, the tax benefits for health insurance for group vs individual plans are highly variable.
Under an individual policy, you are eligible for a tax benefit under Section 80D for a maximum amount of ₹1.5 lakhs annually. For group plans, however, only your employer or group representative/administrator will be eligible for a tax benefit when filing their ITR (Income Tax Returns).
As an employee, you will be eligible for a tax benefit under a group plan only under these conditions:
The employer pays the majority of the premium, and you pay the rest. In this case, the tax benefit is received as contributions towards the payment.
When your employer pays the whole premium amount, and you pay for an additional premium by buying top-up plans or an add-on cover to enhance your policy coverage. You will be eligible for a tax benefit for only the additional premiums you have paid.
Simply put, you will be eligible for a tax benefit only if you actively contribute towards paying the health insurance premium.
Group Health Insurance Vs Individual Health Insurance: Which One Should I Buy?
Group health insurance and individual plans are incredibly different as they cater to different needs. So asking, "Is group health insurance better than individual?" will not give a clear answer as it will depend completely on your needs.
Most Indians choose to get an individual health insurance plan to get more coverage. This approach can be beneficial if you lead a hectic or high-stress lifestyle or suffer from chronic conditions where coverage from a group plan is insufficient.
Besides, group health insurance is offered only to a group of people. A group can be formed in many ways. For example, a group can be formed under an employer, a social or cultural association, or by becoming a member of any association.
An Overview of Group Health Insurance Vs. Individual Health Insurance in India
|Category||Individual Health insurance||Group Health insurance|
|Definition||Offers coverage to a single person||Offers coverage to a group of people|
|Who Can Buy It?||Bought by the insured individual (you)||● Company employers ● Organisation members ● Groups (e.g. families) ● Cooperative societies|
|Who Is Insured?||The policyholder (you)/individual||Member of the group, company, or family members|
|Eligibility||Must be 18 or older. (Children are insured if the parent is covered under the same insurance provider)||Must be a permanent member of the group or company.|
|Medical Check-Up Prior To Purchase?||It may be required. It can be mandatory in the case of senior citizens.||Not required|
|Sum Insured (Coverage Per Policy Year)||High sum insured options||Low sum insured options|
|Pre-Existing Disease Coverage||Has a waiting period of 2 to 4 years||Covered from day 1|
|Maternity Benefit||May be available under some plans||Available|
|Critical Illness Cover||Available as an add-on cover||Not available|
|No Claim Bonus||Available||Not available|
|Tax Benefit||Available||Available only for the employer|
|Extent of Control||Full control; Coverage can be increased or decreased as the policyholder sees fit.||Limited control; Coverage is decided by the employer|
|Premiums||Paid by policyholder||Paid by employer|
|Claims||Raised directly with the insurance provider||Raised through a third-party administrator|
|Policy Term/Validity||Most individual plans come with lifetime renewability||Terminated when the policyholder leaves the group or company.|
Both individual health insurance plans and group plans have their benefits and can be useful under different situations. Regardless of what type of medical insurance plan you choose, always discuss the policy's terms, exclusions and coverage before moving forward with your purchase.
Disclaimer / TnC
Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.