Critical illness insurance has been around for 15 and 20 years and it’s becoming increasingly popular because of the increased costs of medical care. But what exactly is it and what does it cover? Simply put, critical illness insurance is insurance on top of your major medical or group policy that provides a lump-sum payment to the policy holder to cover costs associated with a major or critical illness. When presented as part of a voluntary benefits package, providing your employees with critical illness insurance can be a great way to retain quality talent.
What is covered with Critical Illness Insurance?
The three most common critical illnesses include cancer, a heart attack or a stroke. Critical illness insurance will cover these incidents or anything related to them, and the lump-sum payment could range from $10,000 to $1 million; it all depends on the kind of coverage the policy holder has in place.
One of the benefits of critical illness insurance is it covers not only excess medical bills, but also regular everyday costs. For example, someone who suffers a stroke still has to worry about taking care of a mortgage payment, credit card bills and other ongoing expenses, in addition to their medical costs. Critical illness insurance provides them with this coverage.
Critical Illness Insurance vs. Long-Term Care Insurance
While it may seem like critical illness insurance is similar to long-term care insurance, there’s one major difference: long-term care insurance isn’t provided to the policy holder in the form of a lump-sum payment. Long-term care insurance covers costs on an ongoing basis, and it’s primarily focused on the expenses associated with assisted or long-term care facilities. Critical illness insurance, on the other hand, provides an individual with a large amount of money up front because the need is more immediate. A lot of times when somebody is struck with a critical illness, it’s something that happens suddenly, such as a stroke or heart attack and this necessitates the up-front payout. This is why critical illness insurance is best suited for these kinds of scenarios.
Critical Illness Insurance as a Voluntary Benefit
A good way to offer critical illness insurance to your employees is on a voluntary basis, so it’s up to them to opt-in. This can help control costs. Making it a voluntary benefit and requiring that the employee pay a significant portion of the cost, at a discounted rate, can be a great way to offer a unique benefit without taking on too much risk. It can also be a good way to retain quality employees. By offering it on a group platform, your employees are getting a better rate than if they had to buy it on the individual market.
There are creative ways to structure critical illness insurance as a voluntary benefit so you’re providing your employees with a substantial amount of coverage without exponentially increasing your company’s expenses. Whether it’s employer-paid or employer-subsidized, you can get creative with the way you structure this benefit offering. For example, similar to life insurance, you can offer your employees a flat amount of coverage and give them the option to buy up if they want to increase this coverage. Because there are many ways to customize the way you offer this benefit to your employees, work closely with your insurance broker to help you determine the best option for your business.
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