Group Health Plans vs. Individual Policies: Finding the Right Coverage for You
2 min read
・Jul 30, 2024
Meet Mr Sharma. One of his perks as part of his employee benefits package is group health insurance. The policy covers him and his dependents up to certain limits—that is a good start. But with the rising medical costs and the increasing needs of his growing family, he’s wondering if the group health plan offered by his employer is enough. Or should he consider an individual health plan for more comprehensive coverage?
Let’s examine the differences between group health insurance and individual health insurance.
What are group health plans and individual health plans?
- Group health insurance
This policy, provided by employers, ensures a group of employees and their families. As the insurer spreads the risk across many individuals, this plan costs less.
- Individual health plans
Individuals purchase these plans for themselves and their families. They are more customisable to meet needs.
What’s the difference between group health insurance and individual health insurance?
Here is the distinction between these two types of insurance:
| Feature | Group Health Insurance | Individual Health Plan |
| Meaning | This plan provides group health coverage to a group of people (e.g., employees) | This plan covers one person (policyholder) and their dependents (optional) |
| Cost | Lower due to shared premiums across a group | Higher, as the cost falls solely on the individual |
| Who is insured? | Employees and their dependents (depending on the plan) | Policyholders and their dependents (if chosen) |
Control over the plan | Limited control | Higher control, as you choose a plan that best suits your needs |
| Who purchases the plan? | Employer or the group admin | Individual |
| Eligibility | Must be a permanent employee of the company or the institution arranging such group plans. | Anyone above 18 years old (children can be covered with a parent) |
| Exit criteria | Coverage ends with the employment | Coverage continues as long as premiums are paid |
| Available sum insured | Has lower coverage limits compared to individual plans | Has higher coverage limits |
| Pre-existing diseases (PEDs) | Cover PEDs from day one | May have waiting periods for PEDs |
| Critical illness coverage | Not covered | Can be added as a rider for an additional cost |
| Maternity benefits | Covered with limits | Available if opted for during plan selection |
| Tax benefit | Tax benefits may be available to employers and not policyholders. | Provides tax benefits on premiums paid under Section 80D of the Income Tax Act. |
| Medical check-ups before purchase | Not required | May be required, especially for senior citizens or individuals with any existing illness |
Weighing the Pros and Cons
Here are the advantages and disadvantages of each option:
Group Health Insurance Policy
Pros:
- Lower cost, often partially paid by the employer/institution
- Coverage for PEDs from day one
Cons:
- Limited control over the plan with no customisation
- Coverage is tied to employment/institution; lose coverage if you leave
- Lower coverage limits compared to individual plans
Individual Health Plan
Pros:
- Flexibility to choose and customise coverage with riders as per your needs and budget
- Portable; coverage continues even if you change jobs
- Higher coverage limits
Cons:
- Higher cost compared to group plans
- PEDs may be excluded or have a waiting period
