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Critical Illness: A Vital Part Of A Group Benefits Program

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A few years ago, an employee of one of our business clients had a stroke that left him partially disabled and in a wheelchair. Although his health insurance at work covered most of the medical expenses, he also needed money to help pay for such expenses as widening the doors in his home and making his car wheelchair-accessible. Thanks to the fact that he also had a critical illness policy through his employer, the employee was able to pay those costs with a $25,000 benefit he received.

That’s a vivid example of why employees need CI insurance in addition to their group health plan.

Why employees need CI coverage

How many people really suffer from a critical illness, such as heart disease, heart attack, stroke, kidney disease or cancer? The statistics show it happens more than most people think. (See sidebar.)

Another reason CI insurance is becoming increasingly important: Advances in medial technology continue to improve the survival rate of severely ill and injured patients, who will then need extensive therapy and care.

More than likely, everyone can name one or two family members or friends who’ve had a critical illness. You may even have heard stories from your clients about the huge medical bills these illnesses can ring up. Most employees believe their health insurance will cover them if they experience a critical illness. However, health insurance doesn’t cover everything.

CI insurance provides a solution for gaps between an employee’s total expenses and what health insurance covers. When you consider the total costs associated with a disease like cancer, about one-third are covered by health insurance–direct costs such as hospital charges, doctors’ fees and medications. There may also be expenses health insurance won’t cover, such as deductibles and co-pays, out-of-network treatment, prosthetics and reconstructive medical costs, or alternative and experimental treatments.

That leaves the remaining two-thirds the insured must cover–indirect costs, such as the loss of wages or salary, additional assistance at home, transportation to and from a treatment center, lodging and meals, and child care. Disability coverage may not kick in for several weeks or months. In the meantime, bills still need to be paid.

So how would employees pay expenses relating to a serious illness that health insurance doesn’t cover? Deplete their savings? Credit cards? Borrow from their 401(k)? Raid the kids’ college funds?

Even if an employer provides a rich health insurance plan, disability coverage and life insurance, many employees may still need additional financial help in the event of a catastrophic illness. A disability plan can partially cover an employee’s income, but not the spouse’s. Life insurance pays benefits upon an insured’s death, but because of medical advancements, the likelihood of surviving a critical illness is greater than ever. These are the reasons why a CI product can provide options for filling coverage gaps.

With a voluntary CI product, employers can provide valuable coverage to help employees protect their income and financial assets. It’s a good fit with a company-provided group health insurance plan. A CI product gives employers options for expanding their benefits program and employees choices for filling coverage gaps.

What is critical illness coverage?

CI is a voluntary insurance policy that helps cover expenses of many serious ailments. Benefits are paid directly to the insured in addition to any health care benefits or other insurance the insured may have. CI coverage supplements a group health plan by paying a lump-sum benefit when an insured suffers a critical illness, such as stroke, heart attack, kidney disease and cancer. It’s designed to help fill coverage gaps left by most major medical plans.

The insured can use the benefits to help pay for:

oDirect costs of the covered illness, like deductibles, co-payments and medical expenses not covered by health insurance.

oEveryday living expenses. Insureds can use the benefits to pay for lost wages, mortgage payments, travel to treatment centers–or whatever they need.

Employers can offer CI insurance to supplement the group health insurance plan. They can pay all, part or none of the premium and let employees pay their premiums through payroll deduction.

Employers also can be offered a number of other options:

Group or individual platform. An individual product involves simplified underwriting (some health questions are asked), but insureds own the policy and can keep the coverage if they leave their job. This is an important feature because the likelihood of being diagnosed with a critical illness increases as one ages. A group product is sold on a guaranteed issue basis, where no health questions are asked and the employer owns the policy. Some group products allow conversion to an individual policy if employees leave their job.

Face amounts. Benefits can range from a few thousand dollars up to the maximum a carrier offers. Benefits are paid in a lump sum when an insured is diagnosed with a covered illness.

Wellness benefits. A good CI product will offer wellness benefits that encourage employees to get screened for health problems. Early detection is key.

Family options. Employees may also be able to buy the coverage for their family members.

The market recognizes this need. CI coverage is the top growth product in the worksite marketing industry, according to an Eastbridge Consulting Group Inc. Among carriers surveyed, 53% said CI would be the top-growing voluntary product during the next few years, and 35% said they expect to introduce a CI product in the next year or two.

How can you be part of this growth opportunity, help your clients implement a CI plan with their benefits program and help employees get this valuable coverage? By learning about CI coverage and understanding why employees need it.

Survival rates for heart attacks, strokes, cancer and other critical illnesses are increasing every year. But the financial strain of treating these illnesses can be overwhelming to a family. No matter how good a major medical plan is, employees are likely to face significant out-of-pocket expenses.

Your clients are looking for a practical solution like CI insurance. With its growing popularity, the time is right to add CI coverage to your agency’s portfolio.

Kevin Thompson is managing general agent of the Louisiana sales territory for Colonial Supplemental Insurance, the marketing brand of Colonial Life & Accident Insurance Company, Columbia, S.C. He can be reached at .


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