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Insurance coverage is a must in a person’s portfolio. The rising cost of living has made it necessary to have insurance as hospitalization and medical bills can deplete all the savings of a person. Individuals can be covered under individual health insurance or Group health insurance.
Group insurance offers insurance coverage to more than one person and can have a group of people related by a common factor, like the employees of a company, the family members, or even the members of a society or a professional association. For the employees of a company, it is like an employment benefit and the members are provided a fixed and uniform cover. The premium amount is decided considering the risk to all the members. The company may pay the whole premium or a part premium and deduct a person’s share of the premium from the salary. Members are covered for the time they are working with the company.
An individual health insurance plan covers an individual who purchases the plan according to their requirements. The premium amount depends on age, health, occupation, smoking habits, geographical location, and the type of plan that they choose. The premium is decided at the time of buying the insurance and additional riders can be added as required by the person at a lower cost.
Though both the type of plans provide health insurance coverage there are a few differences between Group and individual health insurance-
1) The Group health insurance covers a group of people while the individual health insurance plan covers a single individual.
2) The Group health insurance is purchased by the employer or the main earning member of the family while the individual health insurance is purchased by an individual policyholder.
3) The insurance contract in the Group health insurance is drawn in the name of the group so it can’t be used for the purpose of obtaining a loan. Individual health insurance can be used by the policyholder to avail of a loan.
4) The waiting period for hospitalization is not there in the group health insurance plans and the health coverage starts from the day the policy is allotted. Almost all individual health insurance plans have an initial waiting period of a month during which the claims are not accepted.
5) The Group health insurance covers preexisting diseases from the start date while in the individual health insurance, there is a waiting period of 2 to 4 years.
6) Medical tests are not mandatory before the purchase of the Group health policy while they are required for individual health policy for persons above the age of 45 years.
7) Add-ons are the additional benefits offered by the insurance company that extends the scope of the base policy and are offered at little extra cost. There may be no or limited add-ons in a group health policy while in an individual health policy a person can avail of any of the add-ons.
8) The available sum insured is low in a Group health insurance plan while in individual health insurance, there is an option to choose a higher sum insured.
9) There is no tax benefit available in a Group health insurance plan but in an Individual health insurance plan the premium paid is deductible from the taxable income under section 80D of the income tax act.
10) Once you leave the job with the company that provides Group health insurance you will not be covered by insurance provided by the employer but will have to purchase your own individual health coverage. In the same way, once you retire you will not be covered by the corporate health insurance plan and will have to purchase your individual health coverage.
In individual health insurance, a person can choose according to their wish whether to continue or discontinue the policy and is not dependent on anyone.
11) The premium on an individual policy is comparatively higher than the group health because in a group the policy is purchased for many persons which is like a bulk purchase.
12) A no-claim bonus is a way by which the health insurance company rewards its policyholder for having a claim-free year. It can be in the form of a cumulative bonus or a discount-free year. Individual health insurance policies have no claim bonus which is unlike the group health insurance policies offered by the employers.
Health insurance is necessary nowadays due to the higher cost of hospitalization involved. Group health insurance is good when provided by the employer but the sum insured may be low and when a person leaves a job they will not be covered. In such cases, individuals can purchase individual health insurance or family floater insurance to cover themselves and their families.