Term insurance plans in India insure your life against uncertain eventualities and help you to provide your family members with the financial security that they deserve. The main reason for a term plan’s popularity is that it offers a high sum assured at an economical premium. Today, even corporate organizations are insuring the lives of their employees via a term policy. Such policies are known as group term insurance plans. These plans differ from individual term policies. Read on to understand the differences between the two term plans.
Individual term insurance
As the name suggests, individual term insurance provides life cover to the policyholder if he or she pays the premiums on time. Here, the premium depends on various factors, such as your age, medical history, lifestyle habits, and the sum assured, among others. For individuals, it is necessary to invest in term insurance plans in India right from a younger age. It is because when you are young, the rate of mortality is less, and there are low chances of getting diagnosed with life-threatening diseases, such as high blood pressure, diabetes, cardiovascular diseases, and cancer. Therefore, you get a term plan at a much more affordable premium compared to an older policyholder.
When you buy an individual term plan, you can select the sum assured as per your family’s financial needs and objectives. With this policy, you will have life insurance until the policy matures if you renew it timely.
Group term insurance
When you join a company, your employer will provide you with a group term plan as a perquisite. Here, your employer pays the premium, and the sum assured may not be significant. So, in this plan, you will have life insurance until you are working for your employer. The sum assured will be common for most of the employees, and it may not be sufficient for your family to achieve their goals in the case of your absence.
Now, when you have got an understanding of both these term plans, we have compared them on various aspects, like:
When compared to an individual term insurance policy, a group term plan is more cost-effective. As a group term plan covers many people, it comes at a cheaper premium. An individual term plan is costlier because it is tailor-made as per your needs.
A group term plan does not offer you the convenience to select the sum assured and pay the premium accordingly. Your employer finalizes all the terms and conditions of the group term plan. Conversely, in an individual term plan, you have the freedom to opt for a sum assured by considering factors like your monetary requirements, goals, and outstanding debts. So, individual term plans are more flexible than group term plans.
One of the most term insurance benefits of an individual plan is that the premium will remain stagnant throughout the policy duration. This means that you can save a large sum over the years. However, in a group term policy, the premium increases with age.
The insurer cannot cancel an individual term plan. If you stop paying the premiums, you will lose the life cover and jeopardize your family’s economic stability. On the other hand, the employer or insurance provider can discontinue the group term insurance plan at any time.
Most of these points indicate that an individual term plan scores over a group term insurance policy. With an individual term plan, your life is insured until the policy is active. However, in a group term plan, you do not have this facility, as you may lose life insurance in the case of retirement, termination of employment, or resignation from the organization.
So, even if your employer has covered you under group term insurance, it is advisable to purchase a separate individual term plan based on your family’s needs and goals.