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Posted by Jimmy Carbonneau, Group insurance and group annuity plans advisor, June 5 2019
Health Insurance
Critical Illness Insurance: A Coverage Appreciated by Employees

Assurance Maladies Graves - doctor taking notes for a diagnosis

Among the benefits that can be offered through your group insurance plan, critical illness insurance is often overlooked. Yet, it can make a world of difference in the lives of employees affected by a critical illness. As we know that one in every two people will develop cancer during their lifetime, it comes as no surprise that critical illness claims are on the rise and there is fast-growing demand for this type of coverage.

Purpose of critical illness insurance

Critical illness insurance provides protection against financial hardship when a person is diagnosed with certain critical illnesses (such as cancer, stroke, heart attack, etc.).

At the onset of such diseases, the person affected goes through a very difficult time and must often miss work to receive treatments. Critical illness insurance promptly provides a lump-sum payment to those persons so they can concentrate on their treatment and recovery instead of worrying about their financial needs.

Naturally, the critical illness insurance products available on the market come with different levels of coverage. It is up to employers to choose the policy that is the best fit for their group insurance plan (or up to the employee in the case of an individual policy).

Markedly different from disability insurance

Critical illness insurance is quite different from disability insurance (short- or long-term). Disability insurance is often included in group insurance plans to protect employees who cannot work for an extended period due to illness. Benefits can often be paid until age 65 in the case of long-term disability.

In contrast, critical illness insurance only pays a lump-sum amount when the illness is diagnosed (often useful for short-term expenses: taxis, hospital parking, spouse leave of absence, etc.). Combining critical illness insurance with disability insurance will provide effective financial protection to employees should they become seriously ill.

Which illnesses are covered?

Providers of critical illness insurance each have their own rules. Therefore, it is crucially important to read the contract carefully in order to understand its scope. Some policies will cover only 3 or 4 illnesses, whereas others will include as many as 20 or 25.

For example, all clients who take advantage of the AGA +PLUS service with AGA Benefit Solutions have critical illness coverage. This benefit is offered free of charge in conjunction with Accidental Death and Dismemberment (ADD) insurance because of our large business volume with the insurer specialized in such coverage. The policy covers the 4 illnesses below:

  • stroke
  • cancer
  • heart attack (myocardial infarction)
  • kidney failure

These 4 illnesses account for approximately 80% of all critical illness claims.

Thus, upon the first diagnosis of one of these 4 illnesses, a non-taxable lump-sum amount of $6,000 will be paid to the employee. Employers can obviously ask for higher coverage if they wish to do so.

Exclusions and limitations

The critical illness insurance benefit is usually payable upon the first diagnosis of one of the specified covered illnesses. For example, if an employee already had cancer, the critical illness protection will not usually apply (with some exceptions after a set period of time). Also, the illness must be severe (i.e. life threatening) for the employee to be eligible for the lump-sum payment.

Moreover, the employee must survive a specified time period (usually 30 days) after being diagnosed to qualify for the lump-sum benefit. It is therefore very important that employees fully understand the limitations of this coverage.

If critical illness insurance is not included in your group insurance plan, adding such coverage could be greatly appreciated by your employees. Contact your AGA Advisor, who will analyze this possibility for you and make a recommendation suited to your situation.

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Jimmy brings overs 20 years of experience in pension plans. After starting his pension career at the Ontario Teachers’ Pension Plan, he worked as DC Consultant for a large actuarial firm and two insurance companies before joining AGA. With his extensive pension experience, he has developed an acute expertise in the selection, the design and the implementation of pension plans. Jimmy provides his clients with both expertise and insight on their employee benefits.
Jimmy Carbonneau, Group insurance and group annuity plans advisor