What Is Group Critical Illness Insurance? Do We Need It? How Much Does It Cost?

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21-07-2020

Group Critical Illness Cover gives your employees a tax-free cash lump sum if they become critically ill while employed by your company.

Most policies cover around 12 serious conditions. However, the most common illnesses employees claim for are:

  • Cancer
  • Heart attacks
  • Strokes.

You can provide your staff with cover between 1 and 5 x basic annual salary.

This cash lump sum can help with everyday expenses as well as cover the cost of any lifestyle changes that may be needed due to a serious illness.

Do We Need Employee Critical Illness Cover?

Everyone faces a very real risk of critical illness during their working lives.

Benefits For Employers

As well as covering your employees against cancer, heart attack, strokes and other serious illnesses, there are a number of additional benefits to getting cover.

For example, Investors in People revealed…

  • Almost 1 in 5 UK employees are unhappy in their job due to a lack of benefits.
  • 44% of UK employees considered company benefits to be one of the most important factors attracting them to a new company.

Offering Critical Illness Cover sends a clear signal you value workers and are there to support when they need it most. An impressive employee benefits package can:

  • Attract new employees
  • Improve employee retention and engagement
  • Reduce stress and associated staff absenteeism. 

More than ever insurers are trying to support their clients with absence management and employee engagement.

Many have introduced everyday tangible benefits that work with the cover. For instance, this might include digital GP services, physio programs, mental health helplines and nutrition / fitness programs.

Benefits For Employees

As a nation we are severely under-protected. Our individual protection survey found only 9% of those surveyed had personal Critical Illness Cover.

Meanwhile, many chose not to take out Life Insurance because they thought it was too expensive.

Anything an employer can therefore do to close this protection gap can make a significant financial difference should an employee become seriously ill.

What Do Employees Use Critical Illness Insurance Payouts For?

Employees can use a Critical Illness Cover payout however they see fit. Once they receive the funds from the scheme, employees can:

  • Adapt a home to accommodate a new disability
  • Pay for medical treatment potentially not yet provided by the NHS due to cost, such as cutting-edge cancer drugs
  • Cover the cost of medical / mobility equipment
  • Pay off a mortgage
  • Stay afloat financially if the illness prevents them from working.

It’s not just about offering offering employees a safety net if they develop a serious illness. There are also a number of everyday benefits that are often provided free alongside Group Critical Illness Cover. These additional benefits, in particular digital GP services, are hugely popular with employees.

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Can We Get Group Critical Illness Insurance?

Depending on the insurer, you will typically need between three and five full-time staff to set up a group scheme.

To add employees to a group policy, they must meet some common minimum requirements:

  • Employees must be within the minimum and maximum entry ages of the policy
  • Staff must be eligible to work in the UK and have a UK working contract
  • They must be an active employee at the company providing the insurance scheme.

Some employers add additional terms before adding an employee to the cover. For example, this might include working for the company for a set period or being above a certain pay grade / status within the company.

Which Serious Illnesses Are Covered?

Group Critical Illness Insurance covers around 10-12 major or critical illnesses as ‘core’ cover. The most common are:

  • Cancer
  • Heart attacks
  • Strokes
  • Kidney failure
  • Motor neurone disease
  • Parkinson’s disease
  • Alzheimer’s disease
  • Major organ transplant
  • Surgery to fit coronary artery bypass grafts
  • Creutzfeldt-Jakob Disease (CJD).

As well as these ‘core’ illnesses, you can opt for your policy to cover an additional 20-25 or so serious illnesses. This will be for an additional premium and includes conditions such as:

  • Aplastic anaemia
  • Bacterial meningitis
  • Benign brain tumour
  • Permanent and irreversible blindness/deafness
  • Cardiomyopathy
  • Paralysis
  • Loss of limbs.

You can find a list of the critical illnesses covered in your policy documents.

Adding Total Permanent Disability

Total and Permanent Disability is often another additional option.

It covers staff should they be unable to work in their own occupation as a result of becoming totally and permanently disabled. This might be through illness or injury.

How Much Does Group Critical Illness Insurance Cost?

Every business is unique. As such, it is difficult to estimate the cost of Group Critical Illness Cover without doing research for your company.

What Factors Influence The Cost Of Cover?

The cost of Company Critical Illness Insurance depends on:

  • The age of your employees
    The older your workforce, the more likely they are to suffer a critical illness, resulting in higher premiums.
  • The number of employees covered
    The more employees you wish to cover the higher the premium. However, there may be a discount per employee for larger groups.
  • The level of cover you opt for
    It’s typical to offer between one and two times an employee’s salary as a payout. The more you offer in cover (the maximum is generally around five times salary, up to a total payout of £500,000), the more expensive your premiums will be.
  • ‘Additional’ critical illnesses covered
    Some insurers provide an option to extend the list of critical illnesses covered which in turn increases the premiums.

For a very rough estimate we’ve laid out example premiums for two different businesses in the table below. For assistance and personalised quotes, however, please don’t hesitate to get in touch. Pop us a call on 02084327333 or email help@drewberry.co.uk.

.

Services Company

Technology Company

Location

Cornwall

London

Employees

100

20

Level of Cover

2 x Basic Salary

1 x Basic Salary

Illnesses Covered

Core + Additional

Core + Additional

Cost
per employee

£9.53
per month

£8.60
per month

Premiums correct as of 27/05/2020

How Is Group Critical Illness Taxed?

For employers Group Critical Illness Insurance is usually an allowable business expense. You can therefore write it off against corporation tax.

For employees there’s usually no income tax on Critical Illness Insurance payouts which means a claim would be paid out tax-free.

Is Group Critical Illness Insurance a P11D Benefit in Kind?

It’s important to know that Group Critical Illness Cover is a taxable benefit in kind (P11D).

This therefore means your employees have to pay additional tax on the premiums you’re paying on their behalf.

Usually, this works through HMRC, which deducts the cost of premiums you’re paying for employees from workers’ personal allowances. Having a lower personal allowance means income tax starts to kick in earlier on their wages.

Who Are The Best Group Critical Illness Insurance Providers In The UK?

Being independent we work with every leading UK insurers. Like any business, no two insurers are the same.

An insurer that’s right for one company may not be the best for your business.

We’ve compiled a list of the top UK insurers we deal with including some of the additional benefits you can expect with their policy.

Policy Details & Additional Benefits

AIG

AIG offer competitive premiums and Smart Health, an innovative health and wellbeing app. Rated 4 / 5 stars on independent reviews website Trustpilot.

AIG Benefits

  • 24 / 7 Telephone or Video GP Service
  • Mental Health Program
  • Online Fitness Program
  • Nutrition Consultations
  • Access to Best Doctors
Aviva

Aviva is a household name whose settlement of Group Insurance claims is among the fastest in the UK market.

Aviva Benefits

  • Access to Best Doctors
  • RedArc Personal Nurse Service for claimants
  • 24 / 7 Qualified Counsellor Stress Helpline
Canada Life

Canada Life has 40 years’ experience in the group risk market. Today it protects almost 3 million employees across 21,000 companies UK-wide.

Canada Life Benefits

  • Personal Nurse Service for Claimants
  • Second Medical Opinion Service
Legal and General

Legal & General is a household name offering competitive premiums and a market-leading rehabilitation support service. Rated 3.4 / 5 stars on independent reviews website Trustpilot.

Legal & General Benefits

  • 24 / 7 Counsellor Telephone Support Service
  • Trained Nurse Medical Advice Helpline
  • Legal Advice Service
Unum

Unum is a leading employee benefits provider, protecting more than 1.4 million people in the UK. In 2018, it paid claims worth £314 million.

Unum Benefits

On a Critical Illness Policy, Unum’s additional benefits are an optional extra for an additional premium. This gives you access to the insurer’s Help@hand service, including:

  • Remote GP Service
  • Second Medical Opinion Service
  • Mental Health Support Program
  • Physiotherapy Sessions

Where Does Group Critical Illness Fit In An Employee Benefits Package?

Group Critical Illness Cover is rarely the first benefit introduced — this is usually Group Life Insurance or Group Health Insurance. However, it’s nonetheless a valued employee benefit.

Group Life Insurance and Group Critical Illness Insurance complement each other. Together, they offer cover for both death and serious illness for the employee and their family.

Group Critical Illness Cover vs Income Protection

Critical Illness Cover pays out a cash lump sum if an employee falls ill. Group Income Protection, on the other hand, pays a proportion of the employee’s wages to help meet regular financial commitments.

Business Critical Illness Insurance only covers a few very serious illnesses.

Meanwhile, Group Income Protection covers staff for anything that medically prevents them working. The most common claims are for issues Critical Illness Insurance would not pay out for including mental health problems and musculoskeletal issues, such as bad backs.

Given the vast array of illnesses and injuries Income Protection covers, it can often be a better option. It usually works as an extension of any company paid sick pay you may provide.

Client Story / Meet Profile Pensions

Profile Pensions introduced a Death in Service scheme for their workforce and feel it’s made a real difference.

“Our employees get comfort from knowing it’s there and we’re proud to provide that,” says Michelle Donlin, Profile Pensions’ HR and Office Manager. “We work hard to provide good benefits to our staff and show a commitment to our employees, so introducing employee benefits was really a logical step.”

George Hay, an employee for 3 years, agrees. “I’ve just had a child, so it means a lot to have that peace of mind that if the worst happens, my family will be supported with four times my annual salary. It’s not something I hope will ever be needed, but it does take a big worry away for me.”

profile pensions group life insurance scheme is a basis for other employee benefits

Should We DIY Or Use An Employee Benefits Adviser?

When setting up Business Critical Illness Cover you have two options. The first is to go direct to an insurer. Alternatively, you could work with an Employee Benefits adviser. It is important to recognise the difference as one provides a lot more support and protection than the other.

Going Direct to an Insurer

If you go direct to an insurer for your policy it is considered a non-advised sale.

YOU are responsible for:

  • Doing your own market research
  • Negotiating the most competitive premium
  • Annually reviewing your policy to ensure it remains competitive
  • Making the final decision, going direct there is no regulated protection.

As you have personally made the decision to take out your policy direct with the insurer there is no financial protection should the policy be inappropriate. The responsibility rests on your shoulders.

Working with an Employee Benefits Adviser

Using an adviser who provides an advised sale takes all the heavy lifting off your desk. Also, responsibility for the recommended policy lies with the adviser.

A good adviser will:

  • Undertake full market research on your behalf
  • Negotiate the best premium utilising their scale and experience
  • Provide ongoing support including with claims
  • Review the on a regular basis to ensure you are always getting the best deal
  • Offer regulated advice, making them responsible for their recommendation and protecting you.

Here at Drewberry we provide a fully advised service so you benefit from expert advice and know you have that additional level of protection should something go wrong.

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Common Group Critical Illness Questions...

  • What's The Difference Between Critical Illness And Terminal Illness?

    Critical Illness Insurance pays out a cash lump sum if you’re diagnosed with one of the serious (critical) medical conditions listed on the policy.

    Your condition doesn’t have to be life-limiting for a successful claim. You could claim for a cancer diagnosis you later recover from with treatment, for example.

    Terminal Illness Cover, on the other hand, is typically included as a free rider on Life Insurance policies. It means the policy will pay out early if a doctor diagnoses you as having less than 12 months to live. The condition must be terminal in the eyes of your doctor / consultant / specialist.

  • What's The Difference Between Group Critical Illness and Income Protection?

    Employee Critical Illness Insurance pays out a single lump sum if one of your employees is diagnosed with a serious illness such as cancer, heart attack or stroke.

    Group Income Protection, however, tends to be more far-reaching and will pay out a regular monthly income for any medical condition that prevents them from working.

  • Does Group Critical Illness Cover Include Employees' Children?

    Children of employees are typically covered for free up to the age of 18. They’ll have cover for a set of specific child-related critical illnesses. You can also include workers’ spouses / civil partners in Group Critical Illness Cover, but this will be at an additional cost.

  • Will My Employees Need A Medical?

    A group scheme will have an associated free cover limit. If an employee’s level of cover is below the free cover limit, no medical evidence is required for them to join the scheme.

    For example, a scheme has a free cover limit of £250,000 sees only members whose level of cover is above £250,000 needing medical underwriting.

    The free cover limit means few if any employees ever require additional medical evidence.

  • Is It Voluntary Or Company Paid Insurance?

    We’re often asked whether a company can introduce Group Critical Illness Cover on a voluntary basis, with only employees who opt in paying for premiums out of their own pockets.

    Unfortunately due to potential adverse risk the policy must be company paid covering all employees or a clearly defined category of employee.

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Compare Group Quotes & Get Expert Advice

Setting up and maintaining a competitive Employee Benefits package can be a bit of a headache. We do the heavy lifting for businesses of all sizes throughout the UK so they can focus on what they are best at: delivering their own proposition.

Why Speak to Us?

We started Drewberry™ because we were tired of being treated like a number.

We all deserve a first class service when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to talk to us.

Simply pop us a call on 02084327333 or email help@drewberry.co.uk.

The staff has been very knowledgeable and I have enjoyed working with Nadeem on setting up our plan.

Kim S
22/06/2020
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