Individual vs. Group Policy: What You Need To Know

Considering whether an individual or group policy insurance plan is right for you can be challenging. That’s why it’s important to understand the differences between each.

Looking at the pros and cons of each, and comparing the two against each other, can help you make an informed decision.

Studies show that a 20-year-old worker has a 3-in-10 chance of becoming disabled before reaching retirement age. (SSA Publication No. 05-10029). Suffering an injury at work is a possibility that you never want to out rule. Buying an insurance plan is a wise personal decision.

Insurance protects you and your family financially.

It’s also important to be informed on your workplace’s insurance policy, in terms to coverage.

Before we dive deeper into the specifics surround the rules and clauses each policy contains, let us provide a general definition of the two.

Individual Insurance

Individual insurance is a type of coverage that you purchase on your own, outside of having access to an insurance plan through your employer. You can also purchase individual insurance on a family basis, outside of the workplace as well.

This type of insurance is meant to protect you from any type of potential injury you incur that’ll hinder your ability to work. This insurance will provide your family financial stability in the worse case that you can no longer continue your daily work tasks.

Group Policy

A group policy is an insurance that is put in place to cover a large group of people. This is a common insurance plan that employers would buy to protect themselves in the case that one of their employees becomes injured. It is typically provided as part of the employee benefits package. It is recommended that if you are offered this type of insurance through your workplace, that you should probably take it.

But, with this decision comes some major factors you should consider such as:

  • Where are the loops in the policy
  • What provisions pay and which ones don’t.

We will get more in depth into these ideas within the next section.

Differentiating Factors

When deciding between individual vs. group policy its imperative to take into account all the differentiating factors/clauses. We have broken down the most substantial elements to consider before purchasing an insurance plan.

Cost

When it comes down to purchasing these plans, cost is a major factor. In a general sense, group insurance is far less expensive than an individual policy.

Often times, group policies are offered to you as terms of your employment,and at no cost! In other situations the insurance policy is part of your benefits package which you can pay with pre tax dollars.

However, it is also important to take into account that the rate you pay could increase as your employer renews the coverage annually. This is different from an individual plan, where the insurance premium per month always stays the same.

Benefits

It’s important to realize that although group plans cost less, this is often in relation to there being less accessible benefits. These plans are also notoriously known to take a long time for you to receive your payments. They’re also known to have shorter payment periods.

In a group plan, the amount you’re entitled to rises as your salary increase. This also means your payable pre tax amount will rise as well.

Within an individual insurance plan, the benefit amount doesn’t increase or decrease, rather it stays stable until you choose to make adjustments to your plan.

Definition Of Disability

The two different insurance policies can hold variations of the word disability.

Disability in a group insurance plan sense means you must be 100% disabled in order to seek compensation. You must not be able to perform any duty of your job whatsoever.

Individual policies often offer partial benefits. This system of partial coverage runs on a percentage basis. For instance, if you are found to be 60% disabled, you could recieve 60% of your benefits.

Definition Of Partial Disability

This is known as perhaps the most essential factor because most claims filed are for partial disability. This means that the injured person is not necessarily completely unable to work. Their disability may make it so that they can only work a few hours each day, which affects their salary accordingly.

As mentioned above, individual plans will see this as a means to obtaining financial benefits, but group policies do not.

Portability And Renewability Provisions

Loosing your benefits happens when you are terminated from your job. This plan is company specific to the workplace your employed with.

An individual insurance plan stays with you. It will move with you through all your career changes. Whenever you take on a new job, you’ll still remained covered.

Taxation

Group insurance policies are paid by your employer and benefits are taxable in the year you receive them.  If this is paid to you in a benefits package with pre tax dollars, then the disability benefits are taxable.

Within your individual disability insurance policy, as long as you make sure you are paying with after tax dollars, then the benefits are not taxable to you.

Contact Conte & Associates Now

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