Group Life Insurance Policy Vs. Regular Insurance Policy - Which Is Better?

Many insurance experts and financial advisors worldwide have corroborated that a life insurance policy must be an essential part of long-term financial planning. A life insurance policy is not only a means to offer protection to your family members against unexpected events, but its investment component allows you to save for long-term goals.In India, life insurance is broadly classified into two types – regular individual life insurance policy and group life insurance policy .

• Group Insurance As the name suggests, a group life insurance policy covers a group of people. It is generally issued by the employers, where they cover the entire workforce under a single policy. The employers are the policyholders, and they complete all the formalities during the purchase. Such plans usually have limited coverage and benefits.
• Regular insurance Regular insurance is purchased by an individual to suit their specific needs, and they can include their family member under the plan. The premium for such policies depends on the type of policy purchased, the policy term, and the sum assured. Under these plans, the insurer agrees to compensate for the loss of life in return for a premium, which is decided at the time of buying the policy.

To know if group life insurance is better or a regular policy, you must know the difference between the two. The difference can be listed under the following parameters:

• Premium Since group life insurance policies cover many people and offer similar benefits to all the members covered under the policy, the premium is much lower than individual policies. You need not pay to pay the premium separately; a small amount is automatically deducted from your salary towards the premium payment.Individual life insurance policies can be customised to suit your specific needs. Also, it offers a wide range of benefits, and consequently, the premium is higher than a group policy. The earlier you buy a life insurance policy, lower the premium.
• Flexibility The group life insurance policy does not give you any flexibility in choosing riders, premium payment mode, etc. The employer and the insurance company decide the terms and conditions, and it is binding on all members covered under the policy.When you buy a regular individual plan, you have the full flexibility to choose the coverage amount, premium payment mode, purchase riders, etc., to suit your specific needs.
• NCB or No Claim Bonus Under a group insurance policy, you don’t get any benefit for a claim-free year.In the regular policy, the insurance company offers NCB for every claim-free year. It is essentially a reward, which can either be a discount on the premium or enhanced coverage. You can claim the reward during renewal.
• Policy validity Since the employer offers the group life insurance policy, you can enjoy its benefits only until you are employed with the company. As soon as you quit the company, the policy ceases to exist, and you cannot file for a claim.However, the regular policy remains valid for long as you keep paying the premium and renewing the policy. Irrespective of whether it is the first year of the policy or the tenth year, you can avail of the benefits, as per the policy terms and conditions.

If you are debating group life insurance vs. regular insurance policy – which is better? Both these policies have their pros and cons. If you are looking for a simple life cover at a lower cost and are not planning to switch jobs for a long time, a group policy would suffice. But, if you are looking for more comprehensive protection for you and your family or if you want the insurance to act as a replacement of income for your family, you must buy a regular policy.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.