An increasing number of businesses are looking for ways to attract and retain the best candidates for all kinds of job roles. Group critical illness insurance provides employees with financial security in case they are struck by serious illness or injury and there are a host of services included within group critical illness insurance schemes that can improve staff health and wellbeing, without having to make a claim.
In this article, we explain how group critical illness insurance works, how it compares with other illness benefits and how much it costs.
1 minute summary
- Group critical illness is a company scheme, set up for and paid by the business
- The number of illnesses covered on a group critical illness policy varies by insurance company, however, every policy must include cancer, heart attack, and stroke
- The cost of group critical illness insurance starts at roughly £5 per employee per month. The final cost will depend on a number of factors including the total number of employees, level of coverage (multiples of gross salary), and age of employees
- Group critical illness is treated as a ‘benefit-in-kind' meaning employees are required to pay the tax (via a P11D) on the premiums paid by the employer
- Claims are paid out tax free
- Premiums can be treated as an expense of the business, reducing the amount of corporation tax paid by the business
- A specialist broker* can provide free, impartial advice that is tailored to your business
What is group critical illness insurance?
Group critical illness insurance is a benefit that can form part of an employee benefits package. The group scheme covers all employees who meet the qualifying criteria set by the employer and may include other types of group insurance, including life insurance, health insurance and income protection.
Group critical illness insurance pays a tax-free cash lump sum of money if an employee is diagnosed with one of a number of listed serious illnesses such as cancer, heart attack or stroke.
Group critical illness insurance, like life insurance and other employee benefits, can enhance the remuneration package offered to new recruits but it can also help increase staff retention rates by adding value for existing employees. Wellbeing tools and services that are included with group critical illness cover can provide support to employees even if they do not claim on the core cover itself. Tools and services include access to private GP appointments, physiotherapy, mental health support, well-being perks and bereavement support. We explain how employers stand to benefit by offering such schemes in more detail below.
How does group critical illness cover work?
Group critical illness cover is set up as a company scheme for employees and is paid for by the business. It is available to businesses of all sizes but in some instances may require a minimum number of employees (usually 10) to qualify.
Businesses can choose to extend group critical illness cover to certain categories of employees and the level of cover (usually a multiple of their gross annual salary) can also be set differently for each group of employees in the scheme.
Critical illness insurance varies depending on the insurance company. Differences include:
- the range of illnesses that are covered
- the minimum number of employees needed to form a scheme
- the cost of cover per employee
- the employee assistance programmes offered (EAPs)
Critical illness cover within a group scheme can automatically cover an employee's children so that they receive a cash lump sum if their child is diagnosed with a listed illness. Spouses and partners of the employee, on the other hand, will usually have to be added to the cover at the employee's request and often at their own expense.
What conditions are covered by group critical illness insurance?
Group critical illness insurance usually covers a number of specific illnesses that include a set of conditions as standard and a number of additional conditions that can be added at extra cost. The list of illnesses that are covered varies from one insurance company to another but all critical illness insurance policies must cover Cancer, Heart attack and Stroke as a minimum. Cancer cover may not cover early-stage and non-invasive cancers as the definition usually refers to cancer that is invasive and spreading.
Standard conditions covered by group critical illness insurance
The following is a sample list of illnesses that are usually covered as standard with Group critical illness insurance:
- Alzheimer’s disease
- Cancer
- Cardiac Arrest
- Coronary artery bypass grafts
- Creutzfeldt-Jakob disease (CJD)
- Dementia
- Heart attack
- Kidney failure
- Major organ transplant
- Motor neurone disease
- Multiple sclerosis
- Parkinson’s disease
- Stroke
Cancer, heart attack and stroke account for the largest number of claims when it comes to critical illness insurance, making up almost 85% of all claims against these types of policies.
Additional conditions covered by Group critical illness insurance
The following is a sample list of additional illnesses and conditions that can be covered with more comprehensive group critical illness insurance:
- Aorta graft surgery
- Aplastic anaemia
- Bacterial meningitis
- Benign brain tumour
- Benign spinal cord tumour
- Blindness
- Cardiomyopathy
- Coma
- Deafness
- Encephalitis
- Heart valve replacement or repair
- HIV infection
- Liver failure
- Loss of a hand or foot
- Loss of independent existence
- Loss of speech
Disability cover with a group critical illness insurance
Group critical illness insurance can include total and permanent disability benefit, which pays out if an employee is unable to work permanently due to any illness or injury. Total and permanent disability cover is commonly available as an addition to the core critical illness insurance at an additional cost. It will pay a tax-free cash lump sum if the group scheme member becomes completely and permanently incapacitated to work. A ‘total and permanent disability payment' is usually made if the employee becomes permanently unable to do their own job, but sometimes, depending on the nature of their work duties, it may only pay out if they become unable to do any job or a series of daily work tasks.
How much does group critical illness insurance cost?
Group critical illness insurance is usually priced per employee and can start at as little as £5 per employee per month. Understandably, the more illnesses and conditions you cover, the more the cover will cost. Larger group insurance schemes may cost less per employee due to economies of scale.
Essentially, the price of Group critical illness insurance is calculated using the following:
- Number of employees
- Level of cover (usually 1 to 5 times gross annual salary)
- Age of employees
Speak to a specialist group critical illness expert* to get a tailored quote for your business
Is group critical illness insurance taxable?
Group critical illness insurance claim payouts are not taxable and the cash lump sum is paid to employees if they are diagnosed with a listed condition without any tax deduction.
However, premiums that pay for group critical illness insurance are subject to tax and we explain this below.
- The business pays national insurance on the premiums that it pays for group critical illness insurance
- The employees pay P11D tax on the premiums that are paid by the employer so the employee's nil rate band threshold will be reduced by the amount of the premiums paid over the year
Can employers claim group critical illness insurance premiums as an expense?
Yes, group critical illness insurance premiums can be treated as an expense of the business thus reducing the amount of corporation tax paid by the business.
Is group critical illness cover a benefit-in-kind?
Yes, group critical illness cover is treated as a benefit-in-kind and is treated as such when employers arrange payroll. Employees are required to pay P11D tax on the premiums that are paid by their employer.
Group critical illness insurance – FAQs
Do employees need to disclose personal health information?
Not usually. Group critical illness insurance schemes provide automatic acceptance for employees up to certain limits. This does however mean that existing medical conditions and new ones that are related to a previous health issue will be excluded from claims. Full critical illness cover without any exclusions is usually only offered if a health assessment has been completed.
Are employees covered if they are absent from work?
In certain circumstances employees can continue to be covered by group critical illness insurance. These can include maternity, paternity and adoption leave as well as absence due to ill health. Insurance providers may have limits to how long the cover will continue in such circumstances which will be detailed within the terms and conditions of the cover.
How does group critical illness insurance enhance employee benefit packages?
Group critical illness cover, like many other employee benefits, enhances the remuneration package offered to employees by giving them benefits that are in addition to their regular income. An increasing number of businesses look for ways to enhance their employee benefits and a comprehensive benefits package may include life insurance, health insurance, sickness benefits as well as serious illness protection.
Group critical illness cover extends financial support to employees who may suffer a serious illness. While sick pay or benefits from other insurances like income protection can provide regular income replacement if the employee cannot work due to ill health which will help to pay their everyday bills and outgoings, critical illness cover gives them a lump sum of money that can be used to fund a number of things including:
- private medical treatment
- adaptation to a home or vehicle
- settling or reducing debts/mortgage
- seeking treatment or therapies abroad
Advantages of Group critical illness insurance for employers
Attracting and retaining staff aside, there are many advantages to arranging a group critical illness insurance scheme for employers. Employers can benefit from the difference that a cash lump sum makes to the recovery and rehabilitation of an employee if they become seriously ill. The financial support can relieve the emotional and mental toll that this situation can have on staff members and help an employee return to work sooner than they may have done without access to the funds and services offered with group critical illness cover.
Additionally, employers can feel better equipped to support employees because they will normally gain access to:
- Mental health support
- 24/7 Private GP appointments
- Specialist nurse advice
- 2nd medical opinion service
- Bereavement counselling
- Rehabilitation services
These types of benefits can provide early interventions that have positive impacts on a business such as:
- Reduced time off work
- Greater sense of wellbeing
- Increased productivity
- Engagement and loyalty
Small to medium-sized businesses can sometimes lack the resources and/or trained personnel to extend the correct help to employees and these services can help fill that gap.
Group critical illness cover vs Group income protection
| Group critical illness cover | Group income protection insurance |
| Pays a lump sum of money | Pays a regular income |
| Pays out for specific listed medical conditions | Pays out if you become unable to work through any illness or injury |
| Payout amount is not taxed | Payout amount is taxed as income and processed via normal payroll |
| Cover stops after a claim is paid | Cover continues after a claim is paid |
| Premiums are paid by the employer | Premiums are paid by the employer |
| Employees pay P11D tax on premiums as it is a benefit-in-kind | Employees do not pay P11D tax on premiums |
| Covers between 1 and 5 times the employee's annual salary | Covers up to 85% of the employee's gross salary |
| Pays out after 10-14 days of survival after a diagnosis | Pays out after the pre-selected deferred period of 1, 4, 13, 26 or 52 weeks |
How to arrange group critical illness cover
Like any other insurance perk for businesses, there are a number of providers to choose from when looking for group critical illness insurance schemes. These include AIG, Aviva, Canada Life, Legal & General, Unum and YuLife, but each provides a slightly different product and depending on your business, some may offer more of the types of benefits and services that suit your business needs.
Employee benefit specialists are well-placed to assist your business in selecting the right group scheme and tailoring it to your specific demands and needs. They usually have access to the best prices and will usually offer better deals than going directly to the insurance company. Employee benefit specialists are knowledgeable about the tax implications of introducing group insurance schemes to your business and can answer your questions as well as provide unbiased guidance and advice.
At Money to the Masses we have vetted the services of an employee benefits specialist broker* that provides expert advice to businesses regardless of their size. You can arrange an initial chat with a group critical illness expert to learn more about the product and receive independent advice that is tailored to your business' needs.
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