What is individual term life insurance?
Term life insurance plans provide individuals who avail a coverage based on the premium paid and is valid for a specified period of time as selected by them for a life cover amount opted. In the event that an individual insured under this policy dies within the policy term, the insurance company would pay a death benefit to the beneficiary/nominee of the insured individual. This payment may be in the form of a single lump sum and / or may be spread across several months for a fixed period of time as per the product terms and conditions.
A number of factors are used to determine what the premium paid ought to be. Term insurance premium calculators are used to provide prospective buyers with an estimate of what their coverage would be. Information that is considered when accounting for the same includes age, gender, medical history, lifestyle preferences, current income, the anticipated annual increase in income, anticipated year of retirement, and so on.
What is group term life insurance?
Group term life insurance is a form of term life insurance under which one contract is issued that provides coverage to a number of people. Most often, companies may choose to avail of this form of insurance to cover their employees. Here, the contract is assigned to the employer who may then offer the coverage provided under this plan as a benefit to their employees. Employees are then entitled to a base amount of this group coverage
Difference between individual and group term life insurance
There exist a number of differences between individual and group term life insurance, which may be listed as follows –
Individual vs group term life insurance
| Group term insurance | Individual term insurance |
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Group insurance is contingent upon member of group which means that it’s only valid so long as membership lasts whereas individual term insurance depends upon personal preference.
| Individual term insurance plans do not depend on how long you are a member of a group. You can choose a policy tenure that matches your coverage needs and enjoy coverage throughout the chosen tenure.
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Group term insurance could also require those who avail of it under a given group to have a certain number of eligibility requirements. These may vary based on the group in charge.
| You have to fulfil the eligibility criteria of the individual term insurance policy that you choose to buy.
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The coverage under group insurance plans depends on the policyholder, i.e., your employer or the head of the group that buys the policy
| You can choose a coverage level depending on your needs
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The premiums for group life insurance plans can be lower for individual members
| The premiums are usually higher compared to group term plans
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You might not have to undergo medical check-ups when being covered under group term plans valid only until the Free Credit Limit
| Medical tests might be required when you buy individual term insurance plans, depending on your age, medical history, sum assured, and other factors
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There is a chance of policy discontinuation if the group does not renew the coverage.
| If you pay the premiums over the chosen tenure, you can enjoy continued coverage
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The choice of riders for enhancing the coverage would depend on the policyholder
| You have the flexibility to choose optional riders with your term insurance plan at a nominal additional premium
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So, understand the differences between group vs individual life insurance plans to know how they work.
Which plan is best for you?
Even if an individual is entitled to benefits that fall under group term insurance, they must consider plans offered by other insurance companies. This will help leave them feeling well assured of the fact that they are availing one of the suitable term life insurance policy presently available in the market.
An individual term life insurance policy is a good choice even when you have group coverage. The reasons are as follows –
- You have complete control over your policy. You can choose the sum assured, the optional riders, the policy tenure, and the premium paying tenure.
- The individual policy might continue if you pay the due premiums even when the group coverage gets terminated.
Key takeaways
- Term insurance plans are offered as individual plans and group plans.
- A group term life insurance policy is one that covers a group of individuals under the same plan.
- An individual term life insurance policy covers one individual under a single plan.
- There are various differences between group and individual term insurance plans in terms of coverage, flexibility, premiums, medical check-ups, etc.
- It is recommended to buy an individual term plan that aligns with your coverage needs even when you have a group term coverage.
Conclusion
We are living in uncertain times and therefore any and all forms of financial security must be embraced with arms wide open. Term life insurance is one such form of financial security which individuals can avail of provided they agree to pay a premium on a recurrent basis. The sooner they avail of it i.e., the younger they are, the lower the premium they incur. Term insurance premium calculators can come in handy in determining what an individual ought to pay as a premium should they choose to avail of an individual policy.
FAQs
Are group life insurance premiums deducted before or after tax?
If you are paying the premium for your group life insurance policy, the employer might deduct the same from your pre-tax or post-tax income, depending on its policies and insurers terms and conditions. You can check your salary breakup to know how premiums are being deducted.
Is group insurance better than individual insurance?
Group insurance is beneficial as it can offer low-cost coverage without the need for individual medical underwriting. However, the policy does not allow you to choose the sum assured or riders and is contingent upon your being a continued member of the group. So, despite the benefits, it is better to have an individual term plan even when you are covered under a group policy.
