Long Term Care Planning

What Is Employee Critical Illness Insurance? [Definitive Guide]

What Is Employee Critical Illness Insurance? [Definitive Guide]

In this article

— Last Updated May 27, 2022

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8 mins
Reviewed by
Eric Berkman

Guide What Is Employee Critical Illness Insurance? [Definitive Guide]

— Last Updated May 27, 2022

Stephanie Wilson

Director of Operations


Reviewed by

Eric Berkman

Insurance is very important, especially if you have a family or people who are depending on you. We should all do our best to make sure that we never have to use our insurance, but sadly there are situations where things are simply out of our control.

It’s especially true when it comes to serious illnesses. Sometimes people live a healthy lifestyle, eat good food, exercise, and still get some illness or injuries that cause major disruptions and require prolonged periods of care.  We all need to hope for the best and it’s important to be prepared for the worst.

That’s what insurance is for, and the insurance policy that can help in these situations is critical illness insurance. Let’s see what you need to know about these policies as an employee of a company.

Defining employee critical illness insurance

Critical illness insurance policies pay a lump sum that’s completely tax-free if dependents (children), spouses, or the policyholder suffers from a serious illness covered in the policy. This coverage typically includes heart attacks, cancer, or serious medical procedures like heart transplants, and other similar types of medical issues.

This kind of coverage is often offered to employees by their respected companies, and that’s why many people call it employee critical illness insurance. However, it’s the same type of coverage as typical critical illness insurance.

Before getting this kind of coverage, you should learn how it works, what it covers, and how to choose the right option for your needs. Employee critical illness insurance plans complement the disability and medical coverage employees have and give you a sense of safety and security.  We’ll dive into that, and how it all works.

How employee critical illness insurance works

As mentioned, these kinds of insurance plans are most commonly offered through employers. To get covered, you will have to select an option level in the benefits scheme that your employer offers.

Check whether the surgical procedure or insured illness meets all of the requirements and definitions within the policy that is offered by your employer. The policyholder will typically receive benefits if they, their partner, or their child survives for at least two weeks from the moment the insured illness has been discovered or they’ve gone through a surgical procedure.

Keep in mind that many specific illnesses have detailed definitions and that you need to have permanent symptoms or have the illness advance to a later stage so that you can get paid the benefits from a typical employee critical illness insurance policy. Employee critical illness insurance plans can cover more than 50 difficult illnesses, but some of the most common ones are:

  • Different types of paralysis
  • Severe burns
  • Amyotrophic lateral sclerosis
  • Multiple sclerosis
  • Alzheimer’s
  • Parkinson’s
  • Coronary artery disease
  • Arteriosclerosis
  • Renal failure
  • Major organ failure/transplant
  • Stroke
  • Heart attacks
  • Cancer

Conditions and illnesses that are generally not covered:

  • Non-invasive cancers
  • High blood pressure
  • Broken bones and other similar injuries

It’s important to check the details of the plan offered by your employer at time of enrollment, re-enrollment, and also periodically so you are always in the loop with any coverage updates.   This is similar to all insurance plans.  It’s good to stay on top the plan details so you’re more aware of how the benefits can help you (or not), when the time comes.

Who can get this kind of coverage?

Some employees are eligible for this kind of coverage under various benefit plans, and they can simply select this benefit during an annual enrollment process. However, some employees can select coverage on their own as an elective coverage option offered by their employer.  Typically speaking, if this kind of coverage, your kids are immediately covered, and there is no limit on the number of children covered.  But again, check the fine print of your plan.

You can also get a benefit for your spouse when you select the cover yourself. In some situations, it’s possible to select your own coverage or choose a coverage for both you and your partner.  Usually, you will have to go through an application process, but sometimes this isn’t necessary.


Benefits of getting critical illness insurance through your employer

There are a lot of differences between getting this kind of insurance by yourself by purchasing a private policy, or through your employer. Here are some of the more noticeable advantages of getting critical illness insurance through your employer:

Complete family coverage

When you get coverage through your employer, your children are typically covered automatically. However, their coverage is adjusted for other potential conditions and illnesses that they may suffer from because they are younger. That includes:

  • Diabetes (Type 1)
  • Spina Bifida
  • Muscle Dystrophy
  • Down’s Syndrome
  • Cystic Fibrosis
  • Cerebral Palsy

These are some of the most common conditions that are covered. When you get insurance through your employer, you typically won’t have any additional costs for covering your children.

Coverage for two occurrences

When getting covered through your employer, you are paid a sum both the first time an illness appears and the second time as well. For example, if the policyholder gets cancer, and needs a procedure of operation to remove a tumor, it could still return in the future.  In this scenario most coverage plans will cover both occurrences.

Coverage for multiple conditions

This insurance typically doesn’t have a lifetime maximum benefit, and benefits can be paid for various conditions.

Better rates

When companies allow their employees to buy this coverage, the offered rates are often much lower than private policies


This coverage isn’t tied to your employer or the company you’re working at. Even if you quit that job, you can still use the same coverage. If you get fired, the coverage also stays.  But you need to make sure of how it becomes portable if you are in the process of separating from your employer.

Can be guaranteed

For companies with over 25 employees, the coverage is typically guaranteed, and it typically doesn’t involve any medical exams, questions, or applications.

Limited coverage and lower costs

One of the reasons these policies have recently become so popular is that they aren’t that expensive, especially when you get employee critical illness insurance. You can find some of the most basic plans for around $25 per month depending on your health classification, age, occupation, and desired benefits.

However, the issue here is that it’s important to find a policy that defines what’s covered and what’s not covered.  Typically, the more illnesses that are covered, the more the policyholder will have to pay for their premiums.

For you to get benefits payment, your coverage must first include the critical illness you’re struggling with, the illness needs to be defined properly, and the severity of the condition will need to be at a certain level.

Why it makes sense to get critical illness coverage

Critical illnesses usually require constant treatment and detailed medical care. The costs of these things can quickly surpass any medical insurance policy a family has. Without an emergency fund or a savings account set aside or health issues, paying these bills can be impossible for a lot of folks.

Many people are getting health plans with high deductibles, but this can easily backfire. Yes, the monthly premiums can be affordable, but there are no options available in case of a serious illness. It’s another reason why people decide to get employee critical illness insurance.

Compared to other insurance types that might be limiting in what they might cover, critical illness insurance can cover some specific needs. Policyholders can typically do whatever they want with the money. Examples include paying for child care, transportation, illness treatment, non-medical costs, and other things that can help them take care of expenses so they can focus on recovery.

In most cases, the benefits get disbursed to the insured person in the form of a lump sum that lets them pay for these costs. The coverage limits can be different from one insurance provider to another. Some people can get only a couple of thousand dollars while some might get one hundred thousand and even more. The pricing of the policy is affected by a lot of different factors.  So, again, it’ll depend on the policy you get and the details of coverage, benefits of insurance, and cost.

When to get critical illness insurance

If you can’t work for a prolonged period of time because you’re suffering from a serious illness, you might think that your employer will pay a part of your income. Some people also think they can count on benefit payments from their employers. But if they don’t have a group critical illness policy through their employer, then they might not be eligible for any coverage to help with a critical illness. If you are looking for some specific insurance, you can also get critical illness insurance for diabetics.

However, in some cases, employees may end up getting Statutory Sick Pay in a short period. This is something you can research to learn if you you qualify.  These state benefits typically won’t fully replace one’s income, and without any cash saved, you won’t be able to sustain yourself and treat the condition you’re suffering from.

Things to check before getting your critical insurance plan

  • See what kind of insurance you are already using and what those policies cover. It’s important to know this because life insurance and other policies could also cover some serious illnesses. You want to avoid getting double coverage for the same thing.
  • Talk to your employer if you’re unable to work due to health issues. Is there some sort of help from their side?
  • Have you opened a savings account with funds you can use for paying your medical or treatment bills?

Get critical illness coverage in case

  • Your whole family depends a lot on your current income and job safety;
  • You don’t have any savings you can use to get through a difficult period;
  • Your employee benefits package doesn’t cover being out from work for a long time due to illness;
  • If you have a long history of chronic illness in your family and would like to secure yourself and your family;
  • If you have financial commitments like dependents or big expenses like a mortgage;
  • Your partner doesn’t have the financial ability or income to cover your critical illness expenses;
  • Your current coverage doesn’t provide enough critical illness insurance.
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How is employee critical illness insurance paid?

When you get employee insurance from your employer, you will get payroll deductions to pay for your coverage. In other words, your employer takes care of everything, and there’s no risk of forgetting about your payments or being irresponsible.

Some insurance plans will require you to pay three insurance premiums in advance so that you can continue the policy while you’re on unpaid leave. If not, these plans will be suspended until you start working again.


Understand how much coverage you need

Naturally, like with other insurance policies, you can set up coverage according to your needs. To do this, you should consider the costs that you would have to cover alongside your treatment costs. These could include:

  • Rent or mortgages;
  • Credits and payments you’re making over time;
  • Dependent costs or childcare;
  • Bills such as other insurance, water, electricity, internet, gas, etc.;
  • Medical expenses related to your treatment like transportation;
  • Living costs;
  • How much money do you have in your savings account;
  • What your benefits package covers;
  • You have the option to get state benefits.

How much of these you can “check” directly affects the amount of coverage you need. Come up with an approximate sum you would need. If you can’t do this yourself, consider finding a financial adviser that can give you some tips and help you calculate the money.

How much does employee critical illness insurance cost?

Aside from getting the right coverage, you also need to find the right policy for your budget and it’s good to know what does disability insurance cover. Each family is different and has different costs. Just because your friend has a monthly premium of “X” dollars doesn’t mean that it will work for you.

You’ll be happy to know that the average monthly premium for this kind of insurance can be as low as around $20, which isn’t a lot at all.  Of course, you’ll need to determine your specific costs yourself.  Here are some other factors that will affect the cost of your policy:

  • The length of the policy;
  • The type of critical illness insurance policy, whether it’s independent or comes with life insurance as well;
  • Whether the cover is only for you or also your partner and children;
  • Current age;
  • How risky your occupation is;
  • Current lifestyle, health, and medical history.


These are all the essentials you need to know about critical illness insurance plans. Take the time to learn all of the aspects of a policy before you get one. At the same time, consider your current financial situation to determine what kind of policy you can pay for every month.


The Department of Insurance. (n.d.). Understanding Your Insurance Policy. Retrieved from South Carolina Department of Insurance website:


Lambert, G.D. (2022). Cut Your Tax Bill With Permanent Life Insurance. Retrieved from Investopedia website:


Araujo, M. (2022). What Are Insurance Premiums?. Retrieved from the Balance website:


U.S. Department of Health & Human Services. (n.d.). Family Health History: The Basics. Retrieved from Centers for Disease Control and Prevention website:


Kagan, J. (2021). Medical Expenses. Retrieved from Investopedia website:


Stephanie Wilson


January 28, 2022

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