Critical illness and disability insurance coverage are not the same, but they are both beneficial – and often necessary for employers.
While you have the option of one or the other, it is in your best interest to consider both, because both pay out in different ways.
Disability insurance, for example, provides income for employees when they are unable to work because of illness or injury.
Critical illness insurance, on the other hand, pays a tax-free lump sum payout following a diagnosis of a serious illness, as long as it is covered by the policy.
Both Work in Tandem
Both policies work together, not against each other. They allow the critical illness sum to cover what the disability insurance does not; therefore, employees with severe illnesses that cannot work or will have reduced hours have full coverage.
In general, disability insurance covers an estimated 50 to 70 percent of lost wages. They do not cover 100 percent of the loss because the payout is tax-free. Therefore, the estimate the 50 to 70 percent payout is what an employee would get if they had paid taxes on the 100 percent payout amount.
The critical illness insurance pays out where the disability insurance fails to do so. So, an employee does not have to worry about losses. The insurance covers those necessary gaps, and top the employee off financially to ensure that they have enough funds to survive.
Also, critical illness insurance covers those medical expenses that are not covered by healthcare insurance plans, such as deductibles, copays, and non-covered options. They also cover the non-medical expenses, such as rent or mortgage, car payments, insurance payments, and even utilities.
There are instances when an employee can still work part-time, which means their disability insurance benefits are cut dramatically based on the fact they are still working. Critical illness insurance, on the other hand, still pays out regardless if the employee is working part-time, full-time, or not at all. Therefore, it is a good supplement when an employee becomes severely ill and must miss work for treatments.
Working with the Right Expert Helps
It is important to your time when picking these types of policies. Both are highly complex, and the payouts are difficult to understand as a layperson. These policies ultimately dictate the future of employees that choose to pay for them; therefore, they should not be selected quickly.
An employer must weigh the pros and cons of offering both, but realize that when they offer employees 100 percent (or more) protection, they are more likely to attract and retain the employees they need for their business to grow.
Working with a trusted insurance advisor is the best way for a business to identify which insurance products they need, including disability and critical illness, and which products they do not. Contact your Advisor if you have any questions about either of these plans, and to find out how they could work for your business.