Group Life Insurance vs Individual Life Insurance: Which Choice Works to Secure Your Family?

Every person aspires to create a security blanket for their family. And Life insurance happens to be one of the most important investments required to fulfil this goal. A good life insurance plan can ensure your family’s financial stability even in your absence. However, choosing the right insurance plan is the difficult part. Nowadays, there are several life insurance variants available in the market.

One popular alternative to regular term insurance is ‘group life insurance’. Group life insurance plans are usually purchased by companies/employers for their employees. If you work as a salaried employee, check your salary breakdown to find out if you are covered by a group life insurance policy. The benefit of group plans is that they secure the lives of numerous people under one policy. However, the question that you might be asking is, “Should I get an individual plan if I am already covered by a group policy?"

Here's a quick breakdown of Group Life Insurance vs Individual Life Insurance to help you decide what option is best for you.

What are Individual Life Insurance Plans?

Individual life insurance plans only provide life cover for one person (or a maximum of two in case of joint cover). When you get an individual life insurance plan, you pay a set amount of premium in exchange for life cover that is payable to your nominees upon your death. Most individual life insurance plans also offer a host of other benefits besides the life cover element itself. For example, a savings life insurance plan will not only provide you with life cover but will also help you grow your wealth over time.

Additionally, you can further enhance your plan’s cover by adding on various option riders. For example, adding a critical illness rider to your plan will grant you an additional cover amount when you’re diagnosed with any of your plan’s listed critical illnesses. To put it simply, an individual life insurance plan is one of the best ways to secure your family’s financial future in your absence.

What are Group Life Insurance Plans?

Group life insurance plans cover multiple lives at once, with each individual member of the plan having their own sum assured/life cover. These plans are usually purchased by:

• Employers for their employees

• Institutions for their core members

• Educational institutions for their faculty

Generally, you cannot buy a group insurance plan for your relatives. Group life insurance acts as the first line of financial aid for an employee’s family. In case an employee passes away, their family members will receive a sum assured to help them stabilize their finances. Each member has their own sum assured, so one individual claim will not affect the sum assured provided to the other members.

Group life insurance plans can also grant extra coverage for critical illnesses or accidents. Once again, the cover will be divided equally among all the members of the plan. Individual members may also increase their own life cover by separately paying additional premiums for themselves.

Comparing Pros & Cons of Individual vs Group Life Insurance Plans

The benefits and downsides of Individual Life Insurance plans include:

Benefits

• Choice to get a savings life insurance plan that offers returns along with life cover

• Greater sum assured for your family

• Additional benefits to further enhance your family’s financial security

Downsides

• Higher entry cost when compared to group insurance plans

• Policyholder/life insured will have to undergo a medical examination

• Term plans generally do not offer any returns if you survive to the end of the policy

• Savings life insurance plans will not provide full returns if you surrender the policy before maturity

The benefits and downsides of Group Life Insurance plans include:

Benefits

• Can secure multiple lives under one plan itself

• Premiums are more affordable as the cost is split among group members

• A great way for employers to secure the families of their employees

• Can provide emergency aid to family members in case of their breadwinner’s untimely passing

Downsides

• Low sum assured that might not be adequate to secure your family

• For salaried individuals, the group insurance premium is generally cut from their monthly salary

• Group insurance provided by your employer/institute will end if you leave your company/institute 

• If you wish to increase your individual sum assured, you will have to pay additional premiums separately and undergo a medical examination.

Quick Differences Between Individual and Group Life Insurance Policies

Individual Life Insurance Plans	Group Life Insurance Plans
Covers only one life, or two in case of joint cover.	Can cover multiple lives under one plan.
Only purchasable by an individual, and the plan’s nominees will generally be the policyholder’s close relatives.	Usually purchased by employers or institute leadership for their employees/faculty. The nominees will be the family members of the employees covered by the plan.
Requires medical examination, especially when purchasing a term life insurance plan.	Does not require a medical examination of individual members, unless a member chooses to enhance their personal sum assured.
Individual plans have numerous optional benefits that enhance coverage. Savings insurance plans also have an element of returns that helps you with your personal wealth growth.	Group plans generally lack optional benefits. Additionally, most group insurance plans do not have any savings element to them. And even if a savings element is present, the returns will be divided among the policy’s members.

 

Conclusion

Group life insurance plan is a great option for employers who want to provide extra benefits to their employees. However, the individual sum assured for a group insurance plan is generally not as high as what you can get through an individual plan. So, if your primary goal is to secure your family’s financial future, you need to consider getting an individual plan with sufficient life cover. Term insurance plans are usually the best option for those who just want life cover for an affordable premium.

But if you also want a return on your investment, consider getting a life insurance plan that offers maturity or survival benefits. Savings insurance plans are quite diverse, and you can surely find an option that suits your investment needs. For example, a Unit-Linked Insurance Plan is perfect for those who are comfortable with the high-risk/high-reward nature of market-linked funds. On the other hand, you may also opt for a completely guaranteed plan where your rate of returns are fixed at the policy inception itself.

 

Aastha Mestry - Portfolio Manager 

An Author and a Full-Time Portfolio Manager, Aastha has 6 years of experience working in the Insurance Industry with businesses globally. With a profound interest in traveling, Aastha also loves to blog in her free time.