Understanding Group Critical Illness Insurance and its Benefits

As an employer, offering a comprehensive benefits package is important for attracting and retaining talent. And one of the most valuable benefits you can offer your staff is critical illness insurance. 

Critical illness insurance pays a tax-free, lump-sum amount to an employee if they develop a serious illness, offering them financial security and peace of mind. 

However, navigating through the world of critical illness insurance benefits can be complex. Here are some key things business owners need to know about offering this health benefit to their employees. 

What is group critical illness insurance?

Group critical illness insurance is a type of policy taken out by an employer to pay a predetermined amount to an employee if they are diagnosed with a covered illness.

To qualify for the benefit, the illness typically has to be particularly serious or life-threatening. You can find the list of covered illnesses in the policy document, so do read it carefully. 

You can use the payout to pay for anything you need, including non-medical expenses. Some of the common expenses that people use the benefit to cover include home adaptions, debt, and daily living expenses. 

How does group critical illness insurance work in Canada?

The employer selects the insurer and owns the group critical illness insurance plan. They are also responsible for paying the premiums on time. The cost of the plan, however, is often split between the employer and the employee, although some employers choose to fund the full premium amount. Where the cost is shared, the employee’s contributions are deducted from their salary. 

The employee receives a one-time payout if they get any of the critical illnesses listed in the policy. Some plans also cover an employee’s spouse and minor children. 

If you are diagnosed with a covered illness, you need to survive a certain period — referred to as the surviving period — before you can file the claim. All group critical illness plans include a surviving period, though its length may vary between 10 to 90 days. 

After you’ve completed the surviving period and filed a claim, it usually takes two to four weeks to receive the payment. However, the claim processing time can vary depending on the insurance carrier and the complexity of the case. 

Once you receive the payout, you are free to use it to pay for anything you want, including, but not limited to:

• Out-of-pocket medical expenses
• Health insurance deductibles
• Transportation costs
• Mortgage payments or house rent
• Childcare expenses
• Home adaptations 
• Homecare services
• Living expenses

Your group policy will not pay for conditions not included in its list, even if the illness is serious. This is one drawback of critical illness insurance coverage. 

Excluded conditions may include illnesses that are severe but not life-threatening, as well as some types of cancer. Less severe conditions resulting from an accident are also usually not covered, and the same goes for illnesses due to alcohol or drug abuse. 

Why get group critical illness insurance for employees?

Group critical illness provides value not only to the employees but also the employer. If you are a business owner, here are three compelling reasons to offer this workplace benefit. 

1. Retention and hiring

Almost 4 out of 10 professionals aren’t satisfied with the overall benefits package offered by their current employer. What’s more, 60% of workers report that perks and benefits are a major factor in considering whether to take up a job offer while 80% of employees prefer additional benefits over a pay rise. 

Long story short, offering a robust employee health benefits package, which would be incomplete without group critical illness cover, can go a long way in helping you hire and retain talent. 

2. Flexibility

Group critical illness cover can easily be combined with other employee benefits to set up a comprehensive benefits package, improving employee morale and job satisfaction. For instance, it could be paired with group life insurance or group disability insurance. 

3. Wellbeing and return-to-work

A serious illness can create significant financial strain for an employee, compounding the stress related to their health condition. Financial support from a successful critical illness claim offers employees a crucial safety net, helping them not only financially but also aiding their physical and mental recovery. Knowing that their illness will not impact their family’s financial wellbeing, employees can focus on what’s most important for them — their recovery. This, in turn, may improve their chances of full and complete recovery and returning to work one day. 

4. Cost-efficient coverage

Compared to individual coverage, group critical illness is considerably cheaper, as risk is spread over a larger group. 

How does employees benefit from group critical illness insurance?

Canada has a robust universal healthcare system, but it doesn’t cover all medical expenses. Group critical illness insurance can help to bridge financial gaps and mitigate the financial consequences of a life-altering or -threatening illness. 

Employer-sponsored critical illness cover can help employees with:

• Paying medical expenses not covered by their provincial healthcare 
• Replacing lost income while they are in recovery
• Paying for home adaptations, home care services, and medical equipment
• Covering transportation costs to and from hospitals and medical centers 

What does group critical illness insurance cover?

Most insurance carriers offer two types of critical illness coverage: basic and comprehensive (or enhanced). However, coverage details may vary across the market. Most providers (if not all) give the option to extend coverage beyond what’s included in a ready-made plan for an additional premium. 

A basic critical illness insurance covers conditions, such as: 

• Heart attack
• Certain types of cancer
• Stroke
• Kidney failure

In addition to these, a comprehensive critical illness covers several other conditions, such as: 

• Aortic surgery
• Acquired brain injury
• Bacterial Meningitis
• Aplastic Anemia
• Blindness
• Coma
• Coronary artery bypass surgery
• Cancer
• Deafness
• Alzheimer’s disease and other forms of dementia
• Loss of speech
• Loss of limbs
• Loss of independent existence
• Heart valve replacement or repair
• Major organ transplant
• Major organ transplant on waiting list
• Paralysis
• Occupational HIV infection
• Severe burns
• Parkinson’s Disease

Common exclusions in critical illness insurance plans

Because every group critical illness cover can be different, carefully read the policy document to find out the exact list of approved conditions and exclusions. 

Common exclusions include:

• Mental illnesses
• Self-inflicted injuries
• Alcohol and drug related ailments
• Certain types and stages of cancer
• Chronic illnesses
• Terminal illnesses
• Cosmetic procedures
• Minor injuries or illnesses

Who does group critical illness insurance cover?

Group critical illness insurance covers employees of a company or members of an association. In some cases, dependents (spouse and children) of the insured person are also covered. 

Who is eligible to receive critical illness coverage?

The eligibility criteria for group critical care plans can differ, but here are some typical requirements:

• Active employment: Generally, you need to be actively employed when the coverage starts. If, due to disability or illness, you are not working when the employer sets up the plan, you might not be able to join until you return to work.
• Type of employment: Some employers offer group health benefits only to their full-time employees, whereas others offer them to all employees, whether full-time or part-time. 
• Minimum service period: Some companies might require employees to complete a certain duration of service before they can access critical illness benefits. This period could range from a few days to several months. 
• Relationship with dependents: Some group critical illness plans cover dependents; others don’t. If dependents are covered, they must be your legal spouse or children. 
• Age limitations: Some plans may include minimum and maximum age limits for coverage, restricting eligibility to those within a specific age bracket. 
• Health requirements: Group insurance requires rigorous underwriting than individual coverage. Nonetheless, some insurance carriers may ask for detailed medical information or a paramedical examination, particularly for higher coverage levels. 

Critical illness insurance policy details

A critical illness insurance policy document includes information about coverage details, survival period, covered illnesses, and exclusions, among other things. 

Benefit amount: This is the maximum benefit the insured receives upon diagnosis of a covered condition.

Partial payout: Some group critical illness insurance plans may issue a partial payout for less critical conditions. The size of the partial payment depends on the severity of the condition. It usually ranges between 10-25% of the total benefit amount, but some insurers cap these payments to a maximum monetary value. Partial payments are usually not deducted from the original sum. This means if later you are diagnosed with a condition that’s eligible for full payment, you will receive the entire sum assured. However, there are exceptions and some policies knock off the amount already paid from a future claim, so be sure to check the policy wording. 

Covered illnesses: This section includes names of illnesses covered by your policy. 

Exclusions: A list of what is not covered by your group cover. Common exclusions include, some types of cancer, prostate tumor, self-inflicted injuries, illnesses resulting from substance abuse, and pre-existing illnesses. 

Survival period: The survival period in critical illness insurance is a small period the insured must survive after diagnosis before they can collect the benefit amount. The survival period can range from 14 to 30 days. 

How to apply and set up a group critical illness insurance policy?

Offering critical illness insurance as one of your employee benefits is one of the cost-effective ways to support your employees (and their families). Here’s how you can set one up. 

• Find out the needs of your employees 
• Decide the coverage amount 
• Compare pricing and offerings of multiple providers 
• Decide the premium payment plan that works best for you and your team
• Choose specific add-ons like disability rider, dependent care, etc.

Conclusion 

All employee-conscious businesses feel a duty to support the health and wellbeing of their staff. Group critical illness insurance supports your workers when they need it most, but it also provides valuable benefits to you, the employer.

Setting up a group critical illness insurance plan is not complicated, but the key is finding the right balance — a plan that addresses the needs of your employees and fits your budget.

Dundas Life has helped many small and medium-sized businesses buy comprehensive critical illness cover at an affordable price. We can help you too. Get in touch with us or have us contact you and our experts will guide you through your options and help you find the right plan at a great price. 

FAQs

Is group critical illness insurance worth it in Canada?

Yes, offering group critical illness insurance can be worth it. It can provide financial security and peace of mind to your employees during a stressful time. At the same time, it can help your company attract and retain talent. For most employees a robust employee benefits is the second-most significant factor — the first being salary — to accept or reject a job offer. 

What happens to group critical illness cover when you leave your job?

It depends. Some group critical illness plans are portable, meaning you can continue coverage after you leave your job. Other group plans are not portable. You can’t take such a plan with you when you retire or change jobs. Whether your plan is portable or not will be mentioned in the policy document. 

Is critical illness insurance and critical accident insurance the same thing?

No, they are two distinct products. Critical illness insurance cover pays a one-time, lump-sum benefit if you develop any of the approved illnesses. In contrast, critical accident insurance pays a lump sum in the event of a covered accident. 

What are some of the limitations of group critical illness insurance?

First, a group critical illness cover may be limited to what your employer chooses. You may not have the option to customize it to your needs. Second, there’s no assurance that you will maintain coverage for the duration you desire. Your employer may discontinue the plan or you might switch jobs and find yourself unable to retain it. 

What are the tax implications of a group critical illness insurance payout?

The tax implications of a group critical illness insurance payout depends on who pays for the policy. There are three possible scenarios:

• Your employer pays the entire premium, in which case the payout will be taxed
• Your employer pays part of the premium, in which case you’ll be taxed only the portion your employer pays
• You pay the entire premium, in which case you’ll not be taxed

How group critical illness insurance coverage is different from an individual policy?

Both group and individual critical illness cover pays a one-time, tax-free benefit if you are diagnosed with a covered condition. However, there are four key differences:

• A group plan is owned by the employer while you are the owner of your individual critical illness policy
• A group plan is considerably cheaper than an individual policy, partly because premiums are often split between the employer and employees and partly because the risk is spread over a group of people
• A group plan doesn’t require a medical exam, but some individual critical illness policies do 
• A group critical illness payout can be a taxable benefit if your employers pays the entire premium or a portion of it