Throughout 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 and many benefit advisers have stepped up to provide guidance on them.

Offerings such as dental, vision, life and disability insurance are familiar to most and offered by many employers, but critical illness insurance is now emerging as one of 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? The first step for brokers who want to sell this benefit is to clear up any misconception with clients 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 then decides how to best spend the money depending on his or her individual situation.

According to a recent Harvard study, 80% of individuals who filed for bankruptcy in the U.S. cited out-of-pocket medical expenses as the reason, with the average bankruptcy filed at around $13,000. Of those individuals, 70% 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 all policies are different, typical critical illnesses covered include cancer, heart attack, end stand renal (kidney) failure, paralysis, coma, stroke, coronary artery bypass surgery and major organ transplant. Other conditions may also be covered, including loss of hearing or vision, Alzheimer’s disease and Parkinson’s disease. Policies can also provide annual health screening benefits to help in early detection and treatment of the aforementioned illnesses.

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 guarantee 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. Health care 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. 

Fleet is president of AmWINS Group Benefits, a wholesale broker of comprehensive group insurance programs and administrative services.

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