A Group Critical Illness policy aims to provide financial protection and peace of mind for employees by paying out a tax free lump sum after they survive a diagnosed and covered critical illness or after specified surgical procedures for 14 days. It helps ease immediate financial problems such as making adjustments in the home, access to treatment and to nursing care. With one in four people suffering from a critical illness between the ages of 30 and 60 there has never been a better time to consider Group Critical Illness as a benefit for your directors and workforce.
This type of policy is a good foundation for smaller employers wishing to provide some form of protection for their staff, who are unable to stretch their budgets to broader Group Income Protection solutions; it can be useful to larger employers to complement existing Group Income Protection and Group Life insurance products and extend their protection package for employees.
You would need to consider: who is to be covered by the policy - Directors and employees only, or including their spouses/civil partners & dependants; the level of benefit – whether it is to be a multiple of salary or a flat sum; if the benefit is be different for different categories of employees; the illnesses and conditions to be covered - Core only or Core plus Additional (from the insurance providers ‘menu’); whether permanent total disability cover is also required. The Maximum insured benefit is generally lower of £500,000 flat sum or 5 times earnings.
The insurance provider will usually set a generous Free Cover Limit, this being the total amount of a normal entrant’s benefit they can cover on standard terms without the need for evidence of insurability. When communicating the Scheme benefit to the membership the illnesses and circumstances they are covered for, and when cover ceases, should be explained; It should be made clear that pre-existing conditions are not covered.
Premiums paid by the company are a trading expense and can be offset against Corporation Tax and will be liable for Class 1A National Insurance Contributions on the premiums. Premiums are treated as a Benefit in Kind (P11D) for employees. The policy membership is reviewed and costed once a year.
If you are interested in getting a quote of costs and benefits to construct a new Group Critical Illness Scheme for the directors and workforce, please contact us here.