We often delay buying an individual health cover assuming that our employer’s group health cover would suffice to meet our medical requirement. What we fail to acknowledge in process is our changing lifestyle, inflation and rising medical costs that may exhaust our savings, in case we don’t have sufficient medical coverage. Also, let’s not forget that obtaining medical insurance policy would cost us more as we grow older. So, is it really wise to exclusively rely on group health cover? Does it make sense for us to sign up for an individual health plan at all? Let’s look at what group and individual insurance entails:
What is covered under group health insurance plan?
You and your family will be covered under group health insurance plan as soon as you begin working with a corporate organization. Simply put, group health plan takes care of medical treatment and hospitalization expenses in case of an emergency. Besides provisioning for pre-existing illnesses and maternity expenses at nominal rate, group insurance plan today, comes with an option to enhance health coverage by paying additional premium, with voluntary Top-Up plan.
What is covered under individual plan?
As a salaried person, you would be covered under your company’s group health insurance plan. Although it provisions for most of the medical treatments and emergencies, the question that arises is whether it is adequate. This is where an individual health plan or family floater plan comes handy. It offers additional benefits to people who are already covered under the group health plan and otherwise too. Unlike group health plan, you can customize your health insurance policy by opting for an add-on cover or Top-Up and Super Top-Up plan, as per the life-stage that you are in.
How does a group health plan fair vis-à-vis individual health plan?
The basic distinction between a group health plan and an individual health plan is that while the former is employer owned and controlled, the latter is owned by the individual. Though both provide a similar cover, yet there exists few key differences between the two. Let’s examine them:
Premium: Group health insurance plan is cheaper than an individual or family floater plan as the risk for the insurance company is spread out over a group of people. However, in individual health plan, your premium outgo can be anywhere between Rs.6000-8000 for sum insured of Rs.5lacs.
Waiting Period: While group policy covers diseases or medical treatments right from day one, there is a waiting period that you have to bear before you are covered under individual health plan. This can be anywhere between 3-6yrs, depending on the insurer and your medical history.
Pre-existing diseases: Group policy covers pre-existing disease right from day one, while there is a waiting period of 3-4 years before these are covered by individual policy. Insurers generally levy certain loading charges and co-payment clause in case of pre-existing illness. In addition to this, you may have to settle for higher premium outgo depending on the nature of your illness.
Also, it will be difficult for you to qualify for an individual health plan if you have pre-existing illness, especially if you happen to be in the advanced stage. This can be challenging if you decide to leave your job or take a sabbatical.
Underwriting: Every person who applies for group health policy is accepted under the plan, irrespective of his age or health condition. In case of individual health plan, insurers can accept or reject your application depending on your age, income, lifestyle and medical history. They may even ask you to pay higher premium or clear part of the total medical expense out of your own pocket, as per the ‘risk factor’ involved.
Customization of policy: A group health plan cannot be customized beyond a certain point as it is up to the organization to choose a plan for its employees, depending on its employee count and overall budget allocation. Your individual policy on the other hand, can be tailor-made to suit your requirement.
Portability: Individual health plan provide you with an option to switch between two plans, insurers and even zones (between regional & all-India coverage) while carrying forward the benefits accrued on previous policy. As per IRDAI regulations, you can now port from a group health cover to an individual health cover at the time of retirement or job change.
Tax benefits: You cannot claim tax benefits on group health plan. On the other hand, you will be eligible for claiming deduction of Rs.25000 & Rs.30000 (senior citizens) respectively, under Section 80D of the Income Tax Act.
How should you choose between the two?
You may not necessarily require a standalone health insurance plan if you are adequately covered under the group health scheme. If you happen to be married and in your late 20s, you must have a minimum sum insured of Rs.5lacs, irrespective of whether (or not) you are insured under group or standalone scheme. However, be wary of the fact that your group insurance would be null and void if you are currently in-between jobs or planning to start your own venture. And this is exactly why you must consider buying a standalone health plan. It is like a strong safety net around you and your family. Consider buying it if you feel your group health scheme is not sufficient enough to meet future requirement.
The author is CEO& Co-founder, Policybazaar.com