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Voluntary critical illness insurance: A safety net for employees

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No one is immune to life-altering and sudden health events, such as heart attacks, strokes or cancer.

Fortunately, with modern medicine and technological advances, Americans are more likely than ever to survive a serious illness, but they may be left with spiraling health care costs, even with major medical insurance coverage.

Mounting premiums and out-of-pocket medical expenses — not to mention indirect costs from missed work — can be an added distraction during the recovery process. In many cases, it can also ruin a family’s financial future.

The American Cancer Society reports that as many as 1.6 million new cases of cancer will be diagnosed in the United States this year alone. In addition, according to the American Heart Association, someone suffers a heart attack every 34 seconds.

Employees often don’t fully comprehend the direct and associated financial ramifications that come with a serious health issue, especially one that impedes their ability to work. Fear of the unknown and an “out of sight, out of mind” mindset play a part in workers not fully understanding the value that insurance protection offers their families. Consider that the average overall economic cost, including direct and indirect expenses, of a heart attack in the United States is approximately $1 million2, an amount that could decimate an employee’s life savings and retirement future.

Employers and HR managers need to be aware of the prevalence of cancer, heart disease and other unpredictable ailments, as well as the fact that very few individuals have a critical care policy to help with the unexpected out-of-pocket costs.

For example, only 13 percent of U.S. workers currently have critical illness insurance coverage, according to the 2012 Aflac WorkForces Report.1 Additionally, nearly 6 in 10 workers (58 percent) don’t have a financial plan in place to handle the unexpected. Another 58 percent either don’t consider health insurance a part of their financial plan or consider it only a minor part.

At a time when most employers have limited options other than to pass increasing health care costs to employees, there is a clear need for agents and brokers to educate HR decision makers about the likelihood of being diagnosed with a critical illness and the financial consequences it can have for their employees. In addition to sharing vital information about the real scenarios workers could face, agents and brokers can play an even more valuable role as a trusted advisor by making clients aware of voluntary insurance solutions — available at no additional benefits cost to employers — that can provide workers with financial relief and peace of mind.

Voluntary critical illness insurance plans offer valuable protection to workers and are designed to help pay the direct and indirect costs associated with a specified critical illness. Many of today’s plans cover commonplace health conditions, such as heart attacks, cancer, strokes, paralysis and end-stage renal failure.

Once diagnosed with any of these conditions, some voluntary policies pay a lump-sum benefit following the diagnosis. Policyholders can apply cash benefits, as the insured individual sees fit, to help with various costs, such as mortgage payments, travel and lodging, and other living expenses that aren’t covered by major medical insurance.

Overall, it’s important for agents and brokers to communicate that voluntary insurance can help provide relief to the sick or injured individual, so recovery is the primary focus — not the ancillary costs.

The high-cost myth

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While workers’ fear and avoidance have driven much of the lack of knowledge about voluntary critical illness policies, the Aflac study also found another surprising conclusion: many employers don’t make these plans available because they believe the cost is too high.

This damaging misconception is influencing workers to bypass voluntary options without understanding all of the price variations and ranges that accompany these types of plans. This finding is especially troubling as it relates to younger workers, because, traditionally, they have access to the lowest rates due to their respective age and health standing.

It’s vital that agents and brokers make sure HR managers and business decision makers realize the rate options associated with critical illness insurance and communicate these findings accurately to employees. Voluntary options help provide cost-effective insurance options for workers without adding costs to an employer’s bottom line, dispelling the high-cost myth.

While the risk for unexpected illness is expected to rise, agents and brokers need to recognize popular misconceptions about insurance policies and educate business decision makers and HR managers about how critical illness insurance options help protect their employees and families.

Critical illness insurance offers important financial protection for the most serious health conditions and should be considered a valuable component of a holistic health insurance benefits package rather than a nice-to-have benefit option.

Voluntary insurance allows companies to enhance their benefits offerings and differentiate themselves from competitors. They also provide the added protection and peace-of-mind employees seek. For agents and brokers, recommending critical illness insurance can go a long way toward ensuring clients have a more satisfied and financially secure workforce.

See also:

Selling to women: 2 trends to drive voluntary sales

7 voluntary products to watch in 2013

Guardian research finds voluntary insurance valuable to employees

1. “Aflac WorkForces Report 2012,” a study conducted by Research Now for Aflac. February 2012.

2. CBS News online, “How Much Would a Heart Attack Cost You?”