Individual Life Insurance vs. Group Life Insurance

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A life insurance policy helps in setting up a financial security net for your close ones in case you are no longer around to take care of them or a sudden loss of income comes your way. However, with the various types of plans offered by the different insurance providers in the market, it can be pretty confusing to make a choice in terms of life coverage that is apt for you.

You may make a choice between an individual life insurance plan, a term insurance plan, and a group life insurance plan, among many others. A common dilemma that one may face is while making a choice between a group life insurance plan and an individual life insurance plan.

However, before you go ahead and make a choice between these plans, it would be beneficial for you to understand both of these plans a bit better. So, hang on to this thread and read along!

Individual Life Insurance Policies

An individual life insurance plan solely covers you and may continue to provide you coverage until your retirement, or even until later in some scenarios. When you first go and opt for a life insurance policy, the insurance provider will levy a fixed premium on the basis of some factors. These factors include your health condition, income, age, the sum assured, and many other factors.

For the traditional life policies, the premium remains the same throughout the duration of the policy. This implies that even if you are required to pay a premium that is slightly higher, your coverage does not decrease as you mature.

Therefore, it is advised to opt for an individual life insurance plan at a young age, which will significantly reduce the premium charges for a cover amount that is higher. Moreover, there is a higher risk of not qualifying for a life coverage policy when you are older, which makes it the best option to purchase a life policy at an early age.

Group Life Insurance Policies

A group life insurance plan is provided by employers as an additional requirement for their employees. Unlike an individual life policy, group policy is owned by the employer of the policyholder. However, you must keep in mind that the coverage offered under such insurance is only applicable if you are eligible. And also, this coverage is extended to you as long as you are employed. On top of this, this life coverage can be canceled at any time by the insurance company or your employer.

The premium on such life cover policies is lower than that of an individual life insurance policy. But, in most cases, the premium rates increase when one reaches a certain age, generally after every 5 years. This means that the premium that you pay on a group cover policy increases as you mature.

Comparison of Individual Life Insurance  vs. Group Life Insurance

Individual Life Insurance

Group Life Insurance

You are holding your own separate life policy contract.

You are covered with others as a part of a group life policy contract.

You have a rate of premium that is fixed in advance, and the company can’t decide to change the rate.

The premiums on the group policy can be changed and can increase if the company decides to raise the rates of premium for the group, depending on the claims experience of the entire group.

The insurance provider cannot cancel the insurance, only you can.

The group life insurance policy can be canceled by the life insurance company that issues it.

The individual policy you hold is completely portable and is not connected to any group. If you are not a member of the group or you leave your job, you will not lose your life coverage.

If you leave the group or your job, the group policy will be canceled.

To further dig deeper for our knowledge, let’s move onto understanding the differences between an individual life insurance policy and a group life insurance policy.

Life Insurance Premium

When you opt for an individual life cover policy, the premium remains the same throughout the duration of the policy. At the same time, the premium charges on a group plan might increase fairly as the policyholder’s age matures.

Life Insurance Coverage

The scope of coverage offered under a group policy is limited as per the terms that are determined by the employer, whereas, there is no limitation when it comes to the amount of the individual life insurance policy. In most cases, the amount of coverage offered under a group plan is not sufficient to cover for extreme conditions. There is no such limitation applicable when one opts for an individual life insurance policy.

Life Insurance Cancellation

An individual policy can’t be canceled by the insurance provider. The only way the coverage provided by your policy becomes unavailable is if you do not pay your premiums on time. On the other hand, the group plan can be canceled either by the insurance provider or your employer. Therefore, these plans have a high degree of uncertainty when it comes to coverage.

Life Insurance Continuity

 As long as you manage to make timely premium payments on your individual life insurance policy, your coverage will continue to exist. Whereas, the coverage provided under a group life insurance plan ceases to exist whenever you quit or lose your job. Some group policies might offer you to option of portability, but this may come with several exclusions and even a high premium.

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To Further Conclude

Life insurance is a powerful financial vehicle when it comes to financially secure your close ones. It is quite a difficult choice when it comes to deciding between a group life insurance plan and an individual life insurance policy. However, it is advised that even if you are covered under a group plan, you should increase the scope of your coverage with an individual plan.

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