Individual Life Insurance Vs. Group Term Life Insurance

If you are getting a group term policy at work, it can be confusing to choose a cheaper plan or opt for an individual policy. Though both options have their own set of pros and cons, here’s a comparison of the plans on certain vital factors.

What is Group Life Insurance Policy?

A group term policy is an insurance plan that makes you eligible for cover after you join a company. Not every company offers such benefits, but most will provide you with insurance which will end after you quit the job. You cannot avail of any maturity benefit but will receive a lump sum amount in the event of death. Let’s take a look at the comparative view of both the plans that you should consider:

  1. Cost

A group insurance policy is less expensive than an individual life insurance plan. It may also happen that your organization doesn’t charge you a penny for the group plan, enabling you to get cover for free. This is especially beneficial for people that don’t want to invest their money in a life insurance policy. Though individual insurance plans are expensive, the biggest advantage of it is being able to customize it. You can choose the amount of sum assured and the policy term according to your requirements which cannot be done for a group term plan.

  1. Eligibility Criteria

Group insurance is lax for an aspect like eligibility criteria when compared to an individual term plan. If you were to buy an individual policy, you would have to undergo a medical checkup and submit past medical records to get a less expensive premium. But with group insurance, you only have to be an employee of the organization to be eligible for the plan. 

  1. Validity

Individual term plans are valid for the given policy term that was agreed on while buying the plan. But this doesn’t stand true for group insurance as the plan is valid for as long as you are part of the organization. If you quit your job, you are no longer covered under the group term plan and may or may not get insurance at your next workplace. Individual life insurance secures you no matter what till the last day of expiry of the policy.

  1. Benefits of Insurance

Group plans are affordable and cost-efficient when your workplace provides you one for free. But individual plans secure you throughout the policy term whereas group plans stop covering you after you switch jobs. You can also customize certain aspects of your plan based on your family’s needs and add riders to maximize coverage. Some riders like the waiver of premium, income benefit rider, critical illness rider, etc. aid you during those unfortunate situations.

  1. Cancellation

Individual policies cannot be canceled but a similar effect can be reflected by stopping the premium payment. This causes the insurance policy to lapse and you end up losing your cover. But in group plan, your policy can be canceled by your employer due to several reasons which bring uncertainty of cover.

Paul Petersen

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