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Make Informed Decision: Group Term Plan Vs Individual Term Plan

By Vikas Chandra Das
21 July 2022, 11:46 AM
make right decision group term plan vs individual term plan

As an employee in a big company, you enjoy many benefits. From a comfortable salary to healthy work conditions to various insurance covers, your employer makes sure you have complete job satisfaction. It is common knowledge that health insurance is offered by employers to their employees. A vast majority of the people depend on this insurance alone and do not even buy their individual health plans. But did you know that many insurers also offer group term insurance plans? Yes, that is correct! In all probability, you also must have a group term cover. In such a case would you need to invest in an individual term plan too?  Take a look at this article to get your answer.

What is Group Term Insurance? 

A group term insurance cover is a basic term life insurance cover offered to all the employees of a company. The sum assured is fixed for everyone. The tenure of the cover is equal to the tenure of employment. If you lose your job or leave it for some reason, you will lose the term life cover as well. The premium of the cover is paid by the employer but if you die within the policy’s tenure, your loved ones will receive the death benefit.

What is Individual Term Insurance?

An individual term insurance plan offers a life cover for a fixed term. These plans are inexpensive and offer a no-frills life cover. If you die within the policy period, your nominees receive the sum assured. If you outlive the policy period, there is nothing to expect in return. Term insurance is very affordable and one of the highest-selling forms of life insurance all across the world.

Differences Between Group Term Insurance and Individual Term Insurance 

 Group Term Insurance Individual Term Insurance 
Premium The premium of the group term insurance plan is usually paid by the employer. The employees do not have to worry about paying regular premiums.If you are the policyholder of an individual term insurance plan, you will have to pay the premium yourself. It is solely and wholly your own responsibility. 
Coverage The coverage amount is fixed by the employer and you cannot adjust it as per your own requirements.You have full freedom and flexibility to choose the coverage amount you want in your individual term insurance plan. You can also customise the policy by adding riders, selecting a tenure of your choice, etc.
TenureThe tenure of the group term plan would be equal to the tenure of your employment. Your family cannot make a claim if you die even one day after you retire or resign from the job.You can choose the tenure you want. The tenure can be of 10 years or 50 years and has no connection to your retirement or working years in any way.
Process to GetYou do not have to make any special applications or undergo any procedures to get the group term cover. It will commence as soon as you get on the rolls of the company.You have to personally apply for the policy. You have to fill out the application forms, submit the documents, pay the premium and then have the policy commence. At times, you may even have to undergo a pre-policy medical test to get the term insurance cover of your choice.
Tax BenefitSince your employer pays the premium, you do not get any tax benefits from the group term insurance plan.You pay the premium of your individual term insurance plan yourself. As a result, you are entitled to get the tax benefits too. As per the rules listed under Section 80 C of the Indian Income Tax Act, you can get a tax rebate of up to INR 1.5 lakhs a year towards the premium you pay for your term insurance plan.
Control You do not have any real control over the group term insurance cover. You receive it when you join the job. You lose it when you leave the job. The coverage offered is fixed. There is no room for you to control the plan in any manner. You have full and complete control over your individual term insurance cover. You can choose the policy period, the volume of cover, etc. You can choose to terminate the plan as and when you wish.

As you can see, there are some very distinguishing differences between a term life plan offered by your employer and a term life plan that you buy yourself.

Group Plan or Individual Plan - Which Type of Term Plan do You Need? 

While a group term plan is beneficial, you should not completely rely on it. This is because you may suddenly lose your job and with that lose your term life cover too. That may be at an older age and then, finding an individual term plan may be challenging. Also, if you have both a group term cover and an individual term cover, your family will receive both the death benefits if you happen to lose your life within the policy period. The wise thing to do therefore would be to have the group term cover and also back it up with an individual term cover as that would allow you to have truly comprehensive and wholesome life coverage.  

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