How group insurance differs from personal insurance

What are the differences between purchasing insurance as a group (for example, a company providing insurance coverage) and purchasing an insurance policy on your own?

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

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).

Group insurance is usually better as it provides coverage for an entire organisation. Any competent human resource department 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 number of years to keep costs low.

As an individual, your costs are pretty much fixed.

Coverage underwriting and pre-existing conditions

One of the biggest advantages with a group policy is that there is usually no underwriting requirements. The risk is viewed as an entire group instead of individually.

This basically means you can get coverage, especially medical coverage even if you have pre-existing medical conditions or are not able to purchase insurance individually.

As an individual, if you are healthy and with no pre-existing medical conditions (including family members), then underwriting is usually pretty fast and uneventful.

However if not, or if you have been hospitalised in the last two years, then underwriting may be more exhaustive and you may find yourself in a situation where you are charged loading (higher fees by percentage) or even unable to get coverage altogether.

Coverage details and choices

One of the downsides of a group insurance plan is that the plans are neither flexible nor customisable.

Your company plan gives you a set amount of coverage in certain categories i.e. basic sum assured, total and permanent disability, critical illness, accidental death, and medical coverage which is set by the company.

There may be differences in coverage depending on whether your coverage is tied to X amount of your pay, or your pay grade/rank/role.

As an individual, you get to customise 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 or her the most money.

Leaving your organisation

You will want to check on the options on your company insurance policy if you leave the organisation (even if you love your job and have no intention of leaving any time soon).

NOTE: You may want to inform your HR executive that you are only checking “out of curiosity”.

Most company plans these days allow you to take out your plan when you leave the organisation. 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 rather important as your company provided policy may have gaps (no critical illness coverage, for instance) or limited coverage (RM50,000 coverage when your total bill could easily be over that amount).

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

Another thing to check about when you leave is whether your policy has a cash value. For example, an investment-linked policy as you are entitled to the cash value as it is your benefit and under your name.

Medical claims and corporate discounts

An often asked question is whether you can claim medical coverage from both your company policy and your personal policy. The short answer is “no” as you can only claim from one at a time.

The exception is if your first medical coverage runs short, leaving you with no choice but to 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 and with devastating consequences).

And treat your company provided coverage as a bonus. More importantly would be to ensure that your risk planning for your life, home and auto is done correctly to ensure you have sufficient coverage in all areas and not take on unnecessary/gimmicky coverage.

This article first appeared in https://mypf.my

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