What group critical illness cover does
Your staff are covered under one policy. If an employee is diagnosed with one of the conditions the insurer lists, and meets the definition for it, the insurer pays them a lump sum. They can use the money however they like: paying the mortgage while they are off work, funding a partner's time off to care for them, or adapting their home.
The amount is usually a multiple of salary or a flat sum for everyone. Many schemes also pay a smaller amount for less severe conditions, and some include cover for employees' children at no extra cost.
How it fits with other employee benefits
Group life pays when someone dies. Group income protection replaces salary during a long absence. Group critical illness cover fills the space between them, giving a cash sum at the point of diagnosis when costs and worries arrive together.
Employers often add it once group life is already in place, either for all staff or as an option employees can choose through a flexible benefits scheme. It can also make a strong benefit for a senior team when budgets do not stretch to the whole workforce.
- Core benefit for all staff, paid by the employer
- Voluntary benefit, chosen and paid for by employees
- Flexible benefit, picked from a menu through salary arrangements
The tax position is different
Because the payout goes straight to the employee, group critical illness cover is normally treated as a benefit in kind. The employer usually reports it on a P11D or through payroll, and the employee may pay income tax on the value of the premium. Employer National Insurance is normally due as well.
The employer can normally treat the premium as a business expense, and the lump sum is normally tax free when the employee receives it. Tax treatment depends on circumstances and on how the scheme is set up, so ask your accountant to confirm before you launch it, and explain the tax point to staff clearly.
Conditions, definitions and children's cover
Each insurer publishes a list of covered conditions, and each condition has its own definition. Some definitions require an illness to reach a certain severity, and some leave out early stage forms. Two schemes with similar headline lists can pay out quite differently, so the wording deserves a careful read.
Children's cover is a common extra. It usually pays a smaller sum if an employee's child is diagnosed with a listed condition, which can make a real difference to a parent who needs time off to care for them. Check the age limits and how many claims each child can make.
How Hi Tomorrow helps employers offer critical illness cover
We look at your workforce, any cover you already provide and your budget. From there we suggest whether a core, voluntary or flexible arrangement suits, and compare the insurers on our panel, including the conditions each one covers and how strict the definitions are.
We help you write simple staff communications that explain what the cover pays for and how the tax works. If an employee is diagnosed, we help them through the claim. At each renewal we review the scheme with you as your team grows.