Group critical illness cover enables employees to receive a tax-free lump sum if they are diagnosed with one of a stated number of serious conditions. Payment is made once they’ve survived a period of 14 days – regardless of whether or not the illness affects their ability to work
Employers can choose between a basic list covering around a dozen core illnesses (like cancer stroke, heart attack, multiple sclerosis, Parkinson’s disease and Alzheimer’s disease) or a more extensive list adding a further 20 or 30 conditions
The product, which creates a P11D liability for employees, is typically arranged to pay out either one times salary or £100,000. It has evolved in importance to reflect the fact that many people now survive major illnesses that previously would have constituted a death sentence. This means they may need extra funds to help finance things like a quality holiday for recuperation purposes or essential adaptations to the home
Despite significant overlap, income protection and critical illness cover can in fact dovetail well together, with the former covering regular outgoings and the latter covering one-off expenses
It will also normally automatically offer partial cover against employees’ children being diagnosed with any of the listed conditions. This will be subject to stated lower limits, which vary from insurer to insurer
Cover is not as broad as that provided by group income protection, which pays an income simply if someone is unable to work. In particular, critical illness cover does not insure against bad backs or stress-related disorders, which can both have a major impact on absenteeism – although the most serious cases of these may qualify for a claim under a scheme’s total permanent disability (TPD) definition
The costs of group critical illness schemes can vary wildly according to factors such as the level of cover provided, and different providers are constantly altering their premium levels and cover details. So, it is essential to review your scheme regularly in conjunction with a specialist intermediary
A market review, which should ideally begin four to six weeks prior to renewal, could secure you more competitive premiums, a broader list of conditions covered, a higher free cover limit or a more appropriate range of added-value benefits
Where EAPs and other additional benefits are duplicated on other group risk schemes, the intermediary can advise on the most appropriate one to use and, possibly also, see if it can reduce costs by cutting out overlap
Because group critical illness cover is one of the less common employee benefits, it can provide employers wishing to offer above average benefits packages with a chance to steal a march on their competitors. You may therefore wish your review to include a benchmarking exercise to establish what other companies in your industry are already offering
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