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Group critical illness is a policy taken out by an employer to pay a tax free lump sum to an employee if they are diagnosed with a serious medical condition or they undergo a defined surgical procedure. A claim will be considered once the employee has survived for a specified period and been diagnosed with or suffered one of the conditions covered by the policy.
Where cover is paid for by the employer, corporation tax relief is given on the premiums, the employer is liable for Class 1A National Insurance contributions on the premiums and premiums are treated as a P11D benefit for employees.
Group critical illness is increasingly being provided on a purely voluntary basis as part of a flexible benefits arrangement. In this case, the premium the employee pays does not qualify for tax relief.
The group risk market insures 610,045 people for benefits totalling £44.1 billion – Swiss Re Group Watch 2020.
The group risk industry paid out £93.6 million in critical illness benefits to 1,349 people during 2019 – GRiD 2020 Claims Survey.
The average claim was £69,411 and the main causes for claim were cancer (65%) and heart attack (9%) – GRiD 2020 Claims Survey.
A group critical illness policy will often include some extra support services designed to help employers and employees alike on a daily basis – even if a claim is never made.
In total, there were 74,707 interactions during 2019 with the additional help and support services that are funded by group risk insurers, giving daily value to employers regardless of whether or not a claim was made under their policy – GRiD 2020 Claims Survey.
Expert advice should always be taken when setting up or reviewing a group risk insurance scheme to ensure that optimum cover is provided, any extra support services offered alongside the policy are used and all tax efficiencies are maximised.
Provides a benefit on an employee’s death
Represents 40% of all insured life cover in the UK
Tax free lump sum up to Lifetime Allowance
Taxable dependants’ pension
Benefits over Lifetime Allowance through “excepted” route
Provides a continuing income during employee’s absence for illness, injury or disability
Represents 80% of all insured income protection cover in the UK
Used to cover employer’s promise of long term sick pay
Paid through payroll in normal way
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