By Scott Brown, Director, Product & Market Development, Unum
Critical illness insurance has been sold abroad since the 1980s and in the United States for more than a decade, but current health and economic realities make the need for this coverage more essential now than ever.
Critical illness insurance has been sold abroad since the 1980s and in the United States for more than a decade, but current health and economic realities make the need for this coverage more essential now than ever.
Not only are health care costs increasing, but employees are facing higher out-of-pocket medical expenses from cost-shifting as well as from gaps in their employers’ health plans. If a family experiences a sudden, life-threatening event, the financial impact can be devastating.
Most U.S. workers don’t have enough savings to pay the extraordinary costs associated with a catastrophic health event. The average personal savings rate in the United States is under 1%, according to the U.S. Department of Commerce. With copayments and other out-of-pocket expenses, families can quickly deplete whatever small savings they have.
Costs That Come With Survival
Thanks to today’s medical technology, we’re living longer and surviving more serious illnesses; however, the costs that come with survival can have significant economic consequences for middle-income families.
The average lifetime cost of a stroke is $100,000 for each survivor1 and of the total cost of fighting heart disease, cancer, and stroke comes directly out of a patient’s pocket.2
Today, 1 in 5 people with health insurance who are diagnosed with cancer use all or most of their savings to meet the financial costs of managing the disease.3
People who had private insurance at the start of a serious illness averaged $13,460 in uncovered medical bills, while those with cancer had average medical debts of $35,878, according to research reported in the policy journal Health Affairs.
Critical illness insurance can help cover the financial gaps that come with a serious illness, helping protect employees’ savings and allowing them to focus on recovery rather than worrying about making ends meet. Critical illness insurance pays benefits directly to employees in addition to any health, disability, or life insurance they may have.
How Critical Illness Coverage Works
Intended to supplement traditional health plans, critical illness insurance pays a lump-sum benefit upon diagnosis of a covered illness or event. It can be used for any purpose.
For example, individual critical illness policies, such as the one offered by Unam, pay 100% of the benefit amount for conditions including heart attack, stroke, major organ transplant, end-stage renal (kidney) failure, and permanent paralysis due to an accident.
Critical illness coverage has traditionally been offered primarily as an individual voluntary benefit, with consumers paying the premium. Now, however, more insurers recognize the value of offering this insurance on a group platform that allows for flexible funding options and simplifies administration for employers with sites in multiple states.
The market leader in both new sales and in-force critical illness coverage, according to Eastbridge Consulting and LIMRA reports, Unum recently introduced a new group critical illness plan to our large-case customers. In addition to conditions covered under individual plans, our group plan also pays 100% of the benefit for conditions including coma resulting from brain injury, blindness, benign brain tumor, and occupational HIV. Both the group and individual plans pay 25% of the benefit amount for coronary artery bypass surgery, and both also offer optional cancer coverage.
Advantages of Group Critical Illness
Whether providing individual or group coverage, critical illness insurance is easy to understand and use, and its value is clear to employees. Most of them know someone who has confronted these conditions and their related costs, or they have dealt with these challenges themselves.
Critical illness coverage has appeal across industry segments, and group coverage provides some additional advantages over individual plans.
A common plan design among group carriers is a multiple payout feature. This means additional benefits are payable when a new critical illness is diagnosed if the events are separated by a specified period of time and are medically unrelated.
Group critical illness also features an optional recurrence benefit that provides an additional payout if there is a recurrence of certain conditions separated by a specified period of time.
No matter how it is offered, critical illness insurance can help relieve the financial impact of today’s uncovered health care expenses for employees and their families.
Scott Brown is responsible for the development, management, and profitability of the voluntary benefits supplemental health portfolio for Unum in Chattanooga, TN. Brown joined the company in 1983, which has since grown significantly in the worksite market and has emerged as a leader in voluntary employee benefits. Brown has served in customer service, marketing, and product development. Contact him at