Life is uncertain, and thus we cannot predict it, but we can plan for it. Today, almost all employee-centric organisations provide group term life insurance to employees to provide them with a financial safety net during unfortunate times. But is it enough for us to meet our life insurance coverage requirements? Or should we also get an individual life insurance policy with it?
Before digging deeper into this question, we need to understand what a group life insurance plan is and what an individual life insurance plan is, how they are different, and what benefits they offer. Let’s read on to get answers to all these questions.
First Off, What is Life Insurance?
Life insurance is a type of insurance coverage under which the insurance company promises to provide compensation to the life assured if they pass away in an unfortunate event. Some term life insurance plans also provide compensation if the life insured gets a disability, either permanent, temporary, partial or complete or suffers from a critical illness.
The compensation provided under a term plan helps the family of the life assured to keep their financial stability intact. Now, there are two ways to get life insurance coverage. If it is provided by our employer, then it is in the form of group term insurance and we get the same coverage as our colleagues. However, in the case of an individual term plan, we need to purchase the plan and decide the coverage we want.
Group Term Life Insurance vs Individual Term Insurance
Let’s understand the key differences between group term plans and personal term plans with the help of the below table.
|Basis||Group Term Plan||Individual Term Plan|
|Policy Proposer/Master||The employer is the master under the contract and thus decides all its terms.||The individual buying the plan is the proposer and he/she decides the terms of coverage.|
|Customisation||We, as employees, cannot customise this plan. Only, the employer can choose if they want any rider coverage or not.||We can customise an individual term plan according to our requirements with the help of riders.|
|Validity||It remains valid only until we remain employed with the employer.||The coverage under this plan remains valid as long as we pay the premiums towards it.|
|Premium Payment||The employer may pay full or a part of the premium. The employee only pays a part of the premium, if required and not otherwise.||We need to pay the entire policy premium ourselves to keep the policy active.|
|Affordability||It is more affordable than personal term plans.||It is less affordable than group term plans.|
Should I Solely Rely On Group Term Life Insurance?
Ideally, one should not solely rely on a group term life plan and should supplement the life insurance coverage with the help of an individual term plan in order to enjoy the following benefits –
- Enhanced Coverage – Getting a personal term plan with a group term plan helps us enhance the amount of death proceeds payable to our loved ones in times of grief and emotional stress. Moreover, the availability of two different term plans allows us to choose two different family members as nominees and enhance their scope of coverage.
- Customisation – The life insurance needs of every individual are distinct and a common group term plan may not always meet them perfectly for everyone. And thus, we must not solely rely on a group term plan. We should consider the group term plan as a default basic life insurance coverage and enhance the same with the help of an individual term plan. Under a personal term plan, we can choose how much of the death proceeds we want our family to receive in times when we are not around them and via which payout option – lump sum or periodic payments.
- Rider Benefits – An employer may or may not choose to provide additional coverage with a group term plan with the help of riders. But, under an individual term plan, we can choose which rider options we want, such as Accidental Death Rider, Accidental Disability Rider, Waiver of Premium (WOP) Rider, Critical Illness Rider, etc.
- Life Cover During Job Change – The coverage provided by a group term plan remains valid as long as we remain associated with the organisation providing it. As soon as we change a job or resign, we cannot claim any life insurance benefits under the group plan. Thus, to remain financially secure during job changes or unemployment, we must get a personal term plan even if our company provides us with a group term plan.
- Tax Benefits – Getting an individual life term plan also helps us save our taxes as the premiums paid towards these plans qualify for deduction under Section 80C of the Income Tax Act. We can claim a deduction of up to Rs. 1.5 Lakh annually for the premiums.
Today, group term life insurance has become a default life cover available to all salaried people; however, we must supplement this coverage with the help of a personal term plan. This helps us enhance the coverage of the life insurance benefit payable to our loved ones during difficult times. Moreover, it also helps us get continuous life insurance coverage even when we are not working or in the middle of getting a new job.