What You Need to Know About Group Health Insurance vs. Individual Health Insurance Plans

One would think that the differences between individual health insurance and group health insurance policies would be easy to understand. However, many people aren’t aware of the distinctions between the two. It’s imperative to compare the two different types of health insurance policies so that you will have valuable information that will help you choose the plan that’s best for you.

While it’s true that both insurance policies will give you similar coverage, where they differ prominently is in the details, particularly with small businesses. If you run a small business, you should take steps now to look into group insurance plans and see if they will benefit you tax-wise and also benefit your employees too.

To be able to understand the difference between individual health insurance and group health insurance so that a more informed choice can be made, it’s important to know what each policy entails.

Here are some of the differences between individual and group plans.


First, let’s define group and individual insurance policies.

Individual Insurance is a policy someone buys for themselves or their family. While the name indicates that these policies only cover one person, that is not the case.

Group Insurance is something a company or organization buys for their employees. They can choose from pre-planned insurance policies or a self-insured plan.



Group insurance plans typically cost less and are available at little to no cost to the employee, which is similar to receiving discounts when you buy in bulk. The employees won’t have to pay extra fees unless they want extra benefits not offered in the group plan. Likewise, premiums for group health insurance plans are deducted from the employee’s salary, whereas premiums for individual plans are paid by the individual separately. In most cases if you’re employed, you won’t need to purchase an individual policy if the employer’s insurance covers most of the person’s needs.

Control and Convenience

While this scenario only rarely happens, an individual can be denied an insurance package for many different reasons, due to a person’s financial or medical history. With group insurance plans, every individual who works for a company is eligible for the package and given automatic approval for the insurance package. This is because the process of underwriting group insurance policies where the person’s medical history is closely examined can sometimes be waived, making it easier to obtain an insurance policy through an organization.

But with individual insurance packages, the individual has the freedom to set their own terms for their policy. You are the only one who can discontinue your plan. The policy can even be decided on the basis of a person’s medical, financial, and social situation rather than spread over a large group of people like group insurance is.

No Claim Bonuses

Even if you don’t ever make a claim throughout the entire time you hold a group policy, you do not receive any benefits as an individual. With individual insurance policies, you could be eligible for a no claim bonus if you don’t make any claims. This bonus is like a reward for being healthy and can be used as a discount for your insurance renewal premiums or an incremental cover at no extra cost to you.

If you don’t make a claim, but another individual makes a claim under a group plan on the grounds of having a baby or contracting a serious illness, the plan’s overall cover that’s offered to the group may be reduced if the employer isn’t willing to pay additional premiums on behalf of the group.


Group plans offer coverage as long as you’re employed and the employer pays the premium unlike individual plans that are applicable at all times. Once you resign or retire, you might have an option to convert your group policy to an individual plan. Nevertheless, the conversion premium is almost always higher than what you would pay for an individual life insurance policy, so it’s sensible to convert to a plan like this only if the premium is lower than a new policy or you are uninsurable otherwise. When you make the decision to convert, you’ll need to produce the certificate of coverage that your employer gave you under the group policy.

What Should I Choose?

Group insurance saves companies and employees more money, making this the best bargain, but affordable individual plans are a necessity that even people who have group insurance cannot afford to live without. This is because individual policies let you choose what’s covered and what isn’t. You can decide which illnesses and diseases you want covered and how much they will be covered for. With group insurance plans, policies are constructed according to the policies and the will of your employer.

After you retire, it may be difficult to get individual health coverage if you don’t already have some, especially if you begin to develop any health issues in your golden years. The premiums will be high if you are able to receive coverage.

For these reasons, it’s important to get an individual health plan even if you have a group plan through your employer. Once you’ve made the decision to get an individual plan, do your homework so that you will get the best quote possible. If needed, you can consult an expert to help you with your decision. This is the single most important choice you will ever make in your life.