Group Critical Illness Cover
A lump sum
when staff fall ill.
Group critical illness cover pays an employee a tax-free lump sum if they are diagnosed with one of the serious conditions listed in the scheme. Your company holds the policy and pays the premiums; the benefit goes to the employee.
It pays on diagnosis, whether or not the employee can still work, which is what distinguishes it from group income protection, where a claim depends on incapacity.
The money is unrestricted. Employees typically use it for the costs a diagnosis brings that salary was never going to stretch to.
What is group critical illness cover?
Group critical illness cover is an employer-arranged scheme paying a lump sum to an employee on diagnosis of a specified serious condition. Benefit is usually expressed as a multiple of salary, commonly one or two times, or as a flat sum such as £25,000 across the workforce.
The employer is the policyholder and pays the premiums. Employees are covered automatically within the eligible category and, below the free cover limit, without answering medical questions.
Unlike income protection, the payment is not tied to being off work. An employee diagnosed with an early-stage cancer who continues working can still claim.
What conditions are covered
The core conditions across the market are cancer meeting a defined severity threshold, heart attack, stroke, multiple sclerosis, kidney failure and major organ transplant. Those account for the overwhelming majority of claims.
Broader schemes extend to dozens of further conditions, and many now include partial payments for less severe diagnoses, early-stage cancers or carcinoma in situ, that pay a smaller sum without ending the cover.
The critical point is that a diagnosis must meet the policy's precise medical definition, not merely share a name with a listed condition. Two schemes that both “cover cancer” can pay in materially different circumstances, so the definitions matter more than the headline count of conditions.
Employee vs family cover options
Most schemes cover the employee alone as standard. Two extensions are common and worth considering.
Children's cover is included as standard by many insurers, paying a smaller sum, often around £25,000 or a percentage of the employee's benefit, if an employee's child is diagnosed with a covered condition. For employees with young families this is frequently the most valued element of the whole scheme.
Partner cover can usually be added, either paid for by the employer or offered to employees on a voluntary basis through payroll.
The benefit-in-kind position
Premiums are normally an allowable business expense for corporation tax where they meet the wholly and exclusively test.
For employees, the position differs from group life and group income protection. Where the employer pays premiums for cover benefiting the employee personally, HMRC generally treats those premiums as a taxable benefit in kind reportable on the P11D. The lump sum itself is normally paid without further tax.
The amounts involved are usually modest relative to the cover provided, but employees should be told rather than discovering it on a P11D. Tax treatment depends on your individual circumstances and may change in the future.
How it sits alongside group income protection
The two products answer different questions and work well together.
Group critical illness pays once, on diagnosis, regardless of ability to work. It suits the one-off costs a serious diagnosis creates: travel to treatment, adapting a home, clearing a debt, or letting a partner take unpaid leave.
Group income protection pays monthly, for as long as the employee is unable to work. It suits the ongoing problem of a salary that has stopped.
If budget allows only one, income protection generally covers the larger financial risk, because long-term incapacity has no natural end. Critical illness is the more visible and better-understood benefit among staff, which is why some employers start there.
Cover Your Family is not FCA regulated and does not arrange schemes. A separate, FCA-regulated adviser will compare definitions across insurers and design the scheme, at no cost to your business.
Who needs it
You should consider group critical illness cover if…
- ✓You already provide death-in-service cover and want to protect staff who survive
- ✓Your workforce has young families who would value children's cover
- ✓You want a visible, well-understood benefit that staff immediately grasp
- ✓You are competing for talent against employers with broader benefits
- ✓You have employees who would face real hardship on statutory sick pay
- ✓You want to complement an existing group income protection scheme
Key benefits
Why it matters
Pays on diagnosis, not incapacity
An employee who keeps working through treatment can still claim, which income protection would not pay for.
The employee decides how to use it
The lump sum is unrestricted, travel to treatment, home adaptations, clearing a debt, or funding a partner's unpaid leave.
Children's cover is often included
Many schemes cover employees' children as standard, which is frequently the element staff value most highly.
Little underwriting for most staff
Below the free cover limit, employees are covered without answering medical questions, including those with existing conditions.
Normally an allowable business expense
Premiums can usually be deducted for corporation tax where they meet the wholly and exclusively test. Tax treatment depends on your individual circumstances and may change in the future.
Highly visible to employees
Staff understand a lump sum on diagnosis immediately, which makes it effective as a recruitment and retention benefit.
Key considerations
Things to weigh up before you apply
Group Critical Illness Covercan be valuable, but it isn't right for everyone in every situation. Cover is subject to underwriting, and a policy only pays out if it is kept up to date and set up correctly, so it's worth understanding the limitations before you decide.
- !Premiums are generally a taxable benefit in kind for employees, reportable on the P11D.
- !A diagnosis must meet the policy's precise medical definition, not simply share a name with a listed condition.
- !It pays once and the cover for that condition then ends; it is not an ongoing income.
- !Definitions vary materially between insurers, so the number of conditions listed is a poor guide to quality.
- !Cover ends when employment ends, so it does not follow the employee.
- !Benefit above the free cover limit requires individual underwriting or can be restricted at claim.
FAQ
Common questions about group critical illness cover
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