What are the differences between purchasing insurance as a group (for example, my company’s provided insurance plan) & purchasing an insurance policy personally on my own?

group-insurance

While the basis of the coverage provided in both a company provided (group) & a personal policy is the same, there are actually a number of differences between both.

Cost

If it’s a group policy, costs are normally covered by your employer. Unless you wish to upgrade your policy, extend your coverage to family members (may/may not be an option) or if you leave the company).

The costs for a group insurance are usually better as it is providing coverage for an entire organization & any competent HR would be comparing policies between different insurance providers for the best possible deal. It is also not uncommon for companies (especially smaller companies), to change providers after a certain number of years to keep costs low.

As an individual, your costs are pretty much fixed.

Coverage Underwriting & Pre-existing Conditions

One of the biggest advantage with a group policy is there is usually no underwriting requirements. The risk is viewed as an entire group instead of reviewed individually. This basically means you can get coverage especially medical coverage even if you have pre-existing conditions or would not be able to purchase insurance individually.

As an individual if you are healthy & with no pre-existing conditions (including family members), then underwriting is usually pretty fast & uneventful. However if not, or if you have been hospitalized in the last 2 years then the underwriting may be more exhaustive. And you may find yourself in situations where you are charged loading (higher fees by %) or even unable to get coverage.

Coverage Details & Choices

One of the cons of a group insurance plan is that the plans are neither flexible nor customizable. Your company plan gives you a set amount of coverage in certain categories (i.e. basic sum assured, total & permanent disability, critical illness, accidental death, medical coverage) which is set by the company. There may be differences in coverage depending on whether your coverage is tied to X amounts of your pay, or your pay grade/rank/role.

As an individual, you get to customize your risk planning depending on your needs. This can be either a boon or a bane depending on whether you get a competent insurance agent/financial advisor to assist you or one who is more interested in selling you policies that make him/her the most money.

Leaving Your Organization

You will want to check on your options on your company insurance policy if you leave the organization (even if you love your job & have no intention of leaving currently). Note: You may want to inform your HR executive that you are just checking to know & not have your HR raising alarm bells to your boss 😉

Most company plans nowadays allow you to take out your plan when you leave the organization. However, it would depend on each individual whether you do so or not. For most individuals, you may have purchased your own insurance policy that covers your minimum needs. This is actually pretty important to do so as your company provided policy may have gaps (no critical illness coverage?!) or limited coverage (50k coverage when your total bill shoots up above 50k…).

Your new company may also provide similar or better insurance coverage so you would not want to do so.

You would also want to check when you leave on whether your policy has cash value (e.g. an investment linked policy) as you are entitled to the cash value as it is your benefit & under your name.

Medical Claims & Corporate Discounts

An often asked question is whether you can claim medical coverage from both your company policy & your personal policy. The short answer to that would be no as you can only claim from one at a time. The exception to that is if your first medical coverage runs short then you can claim the remainder from your second medical coverage. You would also want to claim from your company coverage first (which also often has corporate discounts) before claiming from your personal card which would affect your annual/lifetime medical coverage limit.

In Conclusion

It is actually not a comparison of whether a group or personal policy is best as it depends on your individual needs. For most, the best combination would be to ensure that you have your own personal coverage planned out in today’s uncertain world where even large companies fall (often swiftly & devastatingly). And treat your company provided coverage as a bonus. More importantly would be to ensure that your risk planning for your life, home & auto is done correctly & in a value for money way to ensure you have sufficient coverage in all areas & not take on unnecessary/gimmicky coverage.