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Critical Illness

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As the name suggests, Group Critical Illness pays out a lump sum if an employee is diagnosed with a critical or terminal illness, or undergoes one of the surgical procedures (collectively known as the 'critical illnesses'), covered by the policy.

Different policies cover different critical illnesses. However, all cover cancer, heart attack and stroke. The table below sets out the main features and benefits.

Common features of Group Critical Illness
Employee benefit
  • Lump sum to individual on diagnosis of illness covered by the policy, usually as a multiple of salary
Corporation taxation
  • Full corporation tax deduction for company
Employee taxation
  • Premiums paid by employers are a taxable benefit in kind and are subject to Class 1A NICs 
  • Critical illness benefits are paid free of tax
Free cover limits
  • Pre-existing conditions may be excluded
  • Medical application and underwriting not required within free cover limits.
  • Thus cover can be provided for individuals who may find it difficult to buy on an individual basis.
  • Scheme administration is also simpler
Premium rates
  • The premium cost per employee will normally be well below the individual cost of providing the same benefit from taxed income

Employers can offer critical illness cover through a number of routes and the premium varies accordingly. It can be provided as an employer-paid group benefit or offered as an option through a flexible or voluntary benefits scheme.