How Group Health Insurance Covers Offered By Banks Work


With COVID-19 playing spoilsport, it was time for a revelation for many people, especially employees, that they need health insurance to protect their employees. While the group health insurance market is primarily dominated by private and big public players, many customers, especially those who do not have age on their side, prefer these policies from banks. So, banks have started offering customised health insurance plans for their customers. In addition, most banking bodies have partnered with a popular insurance provider to provide these policies.

While some offer it complimentary to their customers, others need you to pay for activation and renewal. If you are looking to buy a new group health insurance and want to do so from a bank, this article will help you understand how it works and provide you with more insights to help you make a well-informed decision.

What is group health insurance?

A group health insurance plan provides coverage to a group of people, typically belonging to the same family or organisation. Given that they cater to multiple people and the insurer’s risk is spread, these tend to be cheaper than individual health insurance.

Types of groups

When it comes to group insurance plans, there are two primary types of groups for which they are available:

  • Formal group: In most cases, it is the work-based group, such as an employer-employee group, where all people covered by a policy work for the same employer. Here, the employer purchased the plan, and they make it available to all their critical employees at no cost or nominal cost.
  • Informal group: It refers to a group of people who belong to the same cultural association or society and have a bank account, each in the same bank. Here, the group is represented by an administrator or a group leader. The bank is happy to offer a customised plan that can cater to the health insurance of these individuals to the group admin.

How do they work?

In most cases, group insurance plans are purchased by organisations for their employees or in a joint family situation. Here, there are several plans that the insurer offers for groups to benefit from. So, a group admin or head chooses from the plethora of options on offer. But when it comes to banks, the plans are not as diverse compared to other major private and public insurance providers.

In the case of employer-employee insurance, the cost is borne majorly by the organisation, while the employees can be asked to contribute a percentage of the total premium outflow. The policy members are given the option to accept or decline the coverage, and the plan can often be extended to their dependents free of cost.

Banks can also offer basic and advanced group plans. Those who choose the latter will get more benefits, albeit at a higher premium requirement.

Do banks provide a free look period?

Group insurance plans from banks work like policies from any other provider. Here, the banking organisations provide a free look period of 15 days to allow the insured to review the terms and conditions of the policy. If they are dissatisfied with what is on offer, they may request to return the policy. In such cases, they will receive a pro-rata refund of the premium paid after deducting medical tests, stamp duty charges, and others.

What about the waiting period?

The waiting period is also similar to group plans provided by other insurance providers. In most cases, the waiting period is limited to 30 days for general sickness, whereas it can be different based on specific diseases/conditions.

Why choose group insurance plans from banks?

  • Lower premium outflow

Group insurance premiums are already lower because they spread the risk for the insurer. The premium is further reduced when you get it from a banking organisation, making it a cost-efficient option

  • Section 80D benefit

Taxpayers who have availed a group insurance plan can benefit from the deduction against premium payment under Section 80D of Chapter VIA to reduce the overall tax outflow.

  • No waiting period for pre-existing conditions

In some cases, these plans also cover pre-existing conditions from the first day of policy activation because the insured already has an account with the bank.

  • No need for a pre-policy medical checkups

Given the insured has an existing relationship with the bank, they rarely require pre-policy medical checkups to activate the policy.

To wrap up

There is no doubt that customers get better prices when choosing group health insurance from banks, but there is a catch. The waiting period for these policies is significantly different from the usual group plans offered by mainstream players. In addition, banks often merge or stop partnering with a specific provider, which raises questions regarding who will pay for the claims against the existing policies.

These propel users to buy regular insurance plans rather than buy them from banks. If you lack options, make sure you know the exact terms before making the premium payment.

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