What is the difference between group term insurance and individual term insurance?

Group term life insurance is a life insurance policy bought by an employer to cover all its employees under a single master policy, with the employer paying the premium. Individual term insurance is bought by a person for themselves, with the individual paying the premium and choosing the sum assured, tenure, and riders. Both pay a lump sum to the nominee on the insured's death during the policy term.

What is the core difference between the two products?

The core difference is who owns the policy. Under group term insurance, the employer holds the master policy, and each employee is a certificate holder without control over the sum assured, tenure, or continuation. Under individual term insurance, the person insured owns the policy and controls all terms, including the ability to keep the cover regardless of employer, city, or job change.

Group term vs individual term insurance: comparison table

FeatureGroup term insuranceIndividual term insurancePolicy ownerEmployerThe insured personPremium paid byEmployer (usually)The insured personSum assuredSet by employer, usually a salary multipleChosen by the insuredTenure1-year, renewed annually10, 20, 30 years or up to age 75-80Continues after job changeNo, ends on last working dayYes, unaffected by employmentMedical underwritingUsually simple, often no medical testsDetailed medical tests and health historyPremium cost per Rs 1 crore coverVery low (paid by employer, negotiated at group rates)Rs 12,000 to Rs 30,000 per year for a healthy 30-year-oldRiders availableLimited, chosen by employerWide choice (critical illness, accidental death, waiver of premium)

Should an employee rely on group term alone?

No. Group term cover ends when the employee leaves the job, and cannot be revived on the same terms elsewhere. For an employee with dependants, individual term insurance provides continuity of cover across job changes and typically at a higher sum assured than what an employer alone provides. Group term acts as a supplement, not a substitute, for individual cover.

Is group term cheaper than individual term?

Per rupee of cover, yes. Group term premium negotiated for a workforce of hundreds or thousands is significantly cheaper than an individual can access, because the risk is pooled and the insurer's administrative cost is lower. However, the employee does not pay the premium in most group setups, so the comparison is not directly relevant to the individual's out-of-pocket cost.

How does the claim process compare?

Group term claims are typically simpler because underwriting is basic and the employer's records confirm employment, salary, and nominee details. Individual term claims require more documentation because the insurer verifies the health history declared at purchase against the cause of death. Both product types are subject to IRDAI's 30-day settlement timeline once documents are complete.

Can group term cover be ported to an individual policy?

Not directly. Some insurers offer a conversion option that lets an employee move to an individual term or whole life policy on leaving the employer, without fresh medical tests. This must be exercised within a stated window (usually 30 days from the last working day) and typically at revised individual premium rates.

How Plum approaches this

Plum sets clear expectations with employees on what group term covers and where individual term should sit on top, since a benefit that ends on the last working day cannot be the only life insurance an employee with dependants relies on. Across Plum's group book, claims NPS runs at 79 and cashless pre-authorisation clears in a median of 45 minutes on the group health side, which sits alongside the group term life cover. Plum places group cover from a minimum of 7 employees, working with partner insurers including ICICI Lombard, HDFC ERGO, Bajaj Allianz, Star Health, Niva Bupa, and Aditya Birla Health Insurance on the health side, and with specialist life insurers on the group term component.

Frequently asked questions

Can an employee buy individual term insurance while also having group term cover?

Yes. Individual and group cover work independently, and both pay out on the insured's death. Employees with dependants typically hold individual term cover alongside group cover.

Does the employer disclose group term details to employees?

Yes. The employee is issued a certificate of insurance showing sum assured, tenure, and nominee details.

Is the tax treatment different for group and individual term?

The death payout is exempt in both cases under Schedule II, clause 2 of the Income Tax Act, 2025 (recodified Section 10(10D)). Premium paid by an individual on individual term insurance qualifies for deduction under Section 80C or its recodified equivalent under the old regime.

Can group term insurance be paid partly by the employee?

Some employers allow voluntary top-up cover funded by employee salary deductions, in addition to employer-paid base cover.

What sum assured should an employee target on individual term insurance?

A common rule is 10 to 15 times annual income, plus outstanding loans, minus existing group cover. The exact figure depends on dependants, lifestyle, and financial goals.

Does the nominee need to be the same on both policies?

No. The nominee is chosen separately for each policy, and can differ between group and individual cover.