Critical Illness Insurance

05/29/2014

What is Critical Illness Insurance?

Over the past few years, voluntary benefits have emerged as a way for employers to enhance their overall benefits package in an efficient and cost-effective manner. Most people are familiar with offerings such as dental, vision, life and disability insurance, but critical illness insurance is now emerging as the most popular voluntary benefit in the marketplace, primarily due to the increasing costs of medical expenses and employers’ need to shift more of that cost to the employee.
 
What exactly is critical illness insurance? A common misconception is that critical illness insurance is enhanced or supplemental medical coverage for when an individual is diagnosed with a condition such as cancer. In reality, the coverage is a financial benefit, typically designed to pay a lump sum directly to the insured – not to hospitals or doctors – upon diagnosis of a covered critical illness. Funds from the policy can be used to pay for crisis-related bills not covered by major medical insurance, including co-payments, loans, mortgage payments, childcare and daily living expenses. Benefits are paid directly to the policy owner, who decides how to best spend the money depending on his or her individual situation.
 
In a recent study conducted jointly by researchers at Harvard Law School and Harvard Medical School, 60 percent of individuals who filed for bankruptcy in the United States cited out-of-pocket medical expenses as the reason, with the average bankruptcy filed at around $13,000. Of those individuals, 75 percent had major medical insurance, representing the need for critical illness insurance as a financial safety net to protect against non-medical expenses associated with a diagnosis.
 
Though policies vary, typical critical illnesses covered include cancer, heart attack, end stage renal (kidney) failure, paralysis, coma, stroke, coronary artery bypass surgery and major organ transplant. Depending on the carrier, other conditions may be covered, including loss of hearing or vision, Alzheimer’s disease and Parkinson’s disease. Policies can also provide annual health screening benefits to aid early detection and treatment of the aforementioned illnesses.
 
Many employers see the importance and need critical illness coverage fulfills for their employees and have incorporated the plan as part of their benefits, with offerings that include:
  • Allocating a portion of employer HSA contributions toward a base critical illness and buying the policy for employees
  • Packaging stop-loss and critical illness together to negotiate better stop rates or longer renewal periods
  • Using critical illness plans to further wellness initiatives and encourage early detection and prevention of critical illnesses; some critical illness policies will pay a cash benefit each year to encourage wellness exams
The time is now for brokers to introduce critical illness insurance to clients. Premiums are age-based and will not generally increase once the policy is purchased. Brokers can also negotiate guaranteed issue underwriting for clients, providing the opportunity for all employees to participate despite any pre-existing medical conditions. Additionally, policies can typically be purchased whether or not the individual is covered under a major medical plan.
 
With change comes new opportunity. Healthcare reform has altered the structure of employers’ traditional benefit offerings, but brokers who can bring new solutions to clients, such as voluntary benefit packages featuring critical illness insurance, will be positioned for continued success in the new benefit landscape.
Contact Us

To learn more about how AmWINS can help you place coverage for your clients, reach out to your local AmWINS broker.  If you do not have a contact at AmWINS, please click here.

Legal Disclaimer. Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Discussion of insurance policy language is descriptive only. Every policy has different policy language. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. Please refer to your policy for the actual language.

(c) 2017 AmWINS Group, Inc.

Most Popular Insights

Insurance Impacts of COVID-19 on the Healthcare and Senior Living Industry

03/30/20

As the healthcare industry remains on the front lines of battling the COVID-19 pandemic, staying abreast of the changing landscape and how the insurance market is adapting is critical to ensure new exposures are covered and renewals are successfully placed. In this article, our specialists share what they are seeing in the Healthcare and Senior Care markets, tips for risk control and mitigation, and how to get the best results for insureds.

COVID-19 – Are Your Clients Covered?

03/19/20

The disruption to business and everyday life caused by the coronavirus (COVID-19) pandemic is resulting in an economic impact for insureds. Much of this disruption is likely not covered by insurance. We have consulted with several AmWINS insurance specialists across the Property, Casualty and Professional Lines sectors and offer a COVID-19 update.

From Seed to Sale: The Top 5 Issues Impacting the Cannabis Insurance Industry

09/19/19

​Over the last few years, the legal cannabis industry has seen rapid growth and had a significant impact on the U.S. economy. With states continuing to legalize its use, insurance needs for cannabis-related businesses are becoming a popular topic of discussion. This article examines the evolving cannabis industry by exploring five key issues impacting coverage.

Four Key Additional Insured Endorsements for Contractors

Construction contract negotiations, which determine the kind and amount of insurance required for a construction project, can be time-consuming, complicated and frustrating. Project owners require contractors on a project to name the project owner as an additional insured on the contractor’s casualty insurance program. It's important that both project owners and contractors understand the coverage provided by these additional insured endorsements. This article discusses four common ISO additional insured endorsements related to commercial general liability policies purchased by contractors, including their limitations, conditions and exclusions.

How Parametric Products Benefit Catastrophe-Driven Risk Transfer

03/19/20

Parametric insurance is an innovative product that functions differently than traditional insurance by covering the impacts of an event and not just losses sustained to an asset. Proceeds of the policy are paid quickly and can be used flexibly to cover any expense associated with the triggering event. Coverages can be designed to capture the impacts of natural perils and other forms of non-damage business interruptions such as future epidemics. Learn how the parametric landscape has and will continue to play a major role in improving coverage and the recovery experience.

Understanding Property Theories of Recovery and Ensuing Loss Clauses

​The theories of recovery, as well as the ensuing loss provisions, contained in property insurance policies are often complex and, at times, seemingly in conflict. Although a policy may not directly address these theories, their application by courts plays a significant role in the coverage determination process after the claim. It is essential that brokers understand the primary theories of recovery – Efficient Proximate Cause, the Concurrent Causation Doctrine, and the Anti-Concurrent Causation Doctrine – in order to navigate the challenging post-claim process and effectively serve their clients.

Sign Up For Our Monthly Newsletter

Sign Up