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Disadvantages Of Group Coverage

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The advantages and disadvantages of group risk coverage

Group risk coverage is a form of insurance offered to groups of individuals who share similar characteristics. These groups usually consist of members of a particular profession or employees under a single employer or group of employers. Group risk cover differs from individual cover in that it considers the entire group as a single entity in evaluating, insuring and pricing for risk. The benefits usually covered by group risk plans include medical care, life insurance and disability care. All members of the group share in the financial risk of the covered events. Owing to the group being considered as a whole, cross-subsidising occurs whereby healthier lives pay the same premium as less healthy lives. (Clark, 2012)
The main advantage of group risk coverage is that the insurance administration, underwriting and marketing costs for a larger group are much less than those required for an individual …show more content…

Furthermore, group risk coverage is less comprehensive than individual cover. This may result in employees taking out additional insurance to protect themselves, in the event of these uninsured outcomes occurring (Clark, 2012). Some employees, not wishing to pay two premiums for coverage, may opt to pay for full coverage from an external insurer rather than for group risk coverage.
Group risk coverage is a popular insurance vehicle as it provides cover for employees and their dependents at a lower premium than under an individual insurance plan. However, the advantages of group risk cover are best displayed in large companies, while small companies often cannot afford this cover. Due to the limited protection offered by group risk cover, employees may prefer individual insurance or may be disinclined to seek employment elsewhere for fear of losing their current

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