Additional Insurance Cover

Terminal illness

Many life insurance products will include cover for terminal illness, as standard, whereas some insurance providers will offer this as a separate add-on to an insurance policy that you will have to pay an additional fee for.

If a policy provides terminal illness cover and, during the term of the life insurance policy, the insured is sadly diagnosed with a terminal illness and is only given a life expectancy of 12 months or less to live, then a cash lump sum will be paid out on the policy upon a valid claim being made.

Terminal illness cover is not the same as critical illness cover.

Critical illness cover is always an optional add on to a life insurance policy and is not typically included, as standard, like terminal illness cover very often is.

Critical illness specifically covers serious medical conditions, illnesses or injuries that are specifically referred to in the terms and conditions of an insurance policy that includes critical illness cover.

Terminal illness cover will only pay out in the event the insured is diagnosed with a terminal illness - i.e. an illness that there is no known cure for or that cannot be cured - and has been told by a medical professional that they are expected to die within a year.

Critical illness

Critical illness cover will pay out a cash lump sum to an employer, should the insured become critically ill and unable to perform their work duties as a result.

A full list of the serious illnesses or medical issues covered - such as cancer, heart attacks and strokes - will be included in a policy’s terms and conditions.

Critical illness cover is not always included in standard life insurance policies; it is usually an optional ‘add on’ that you will have to pay extra for and can make the cost of insurance premiums up to five times more expensive.

However, despite the additional costs, it’s still worth adding this ‘belt and braces’ cover to an insurance policy to feel reassured and secure about your business’s future.

Bear in mind that there is a much higher risk of the insured falling critically ill than there is of them dying and this is the reason why, despite the additional cost, many businesses choose to pay for and include this extra cover.

Taking out this cover on a worker who is younger and in good health can help to lower the premiums. Conversely, someone who is much older (say, over 60) and who perhaps has pre-existing health conditions is going to bump the premiums up.

When comparing deals and before committing to a policy with critical illness cover, carefully scrutinise exactly what ‘critical illnesses’ are mentioned as covered. A cheaper policy can mean that fewer illnesses are covered and may not be fit for purpose.

Critical illness cover should not be confused with terminal illness cover.

Some life insurance policies will include terminal illness cover, as standard, but critical illness is typically an add-on that you have to pay extra for.

Critical illness pays out for serious medical conditions, illnesses or injuries, whereas terminal illness only pays out if the insured is diagnosed with a terminal illness with less than 12 months to live.

Disability

Whilst there isn’t a stand alone insurance product for a valuable employee who becomes unable to work due to long term disability, there are many insurance policies that include this key element of cover, as standard.

If disability cover isn’t included in a standard insurance policy, then you will have to pay extra to have this specific cover added on to your policy.

Depending on the policy terms and whether disability cover is included, if a successful claim is made then your business will either receive a lump sum payment or monthly instalments to help cover any losses sustained as a result of the insured’s absence.

Always carefully read the terms and conditions of an insurance policy and look out for specific exemptions and that disability is covered.

Disability insurance cover typically only lasts for between 6 and 24 months, assuming that is sufficient time for a business to recover from the insured’s temporary absence.

Self-employment

Some businesses will have really important and valuable workers that undertake work for their business, but that do so on a self-employed basis.

However, this doesn’t mean you are not entitled to take out protective insurance for your business against someone who is, even though they’re a self-employed person, an incredibly valuable and important worker.

If a self-employed individual is vitally important to the smooth operation of your business and/or their long-term absence could affect your company’s income, then they are most definitely worth insuring.

Self-employment insurance will typically be treated by insurers and set up in a similar way to a life insurance policy or critical illness cover.

If the self-employed worker falls seriously ill or dies, your business will receive a lump sum payment to help you deal with the disruption and financial fallout this would inevitably cause.

Alternatively, you may want to consider arranging income protection insurance for a self-employed worker which instead of paying out a lump sum would pay regular monthly payments for a fixed period of time.

Term Life Insurance

Certain insurance products function like a term life insurance policy meaning the protective cover is often over a shorter period of time (term) rather than for the whole of someone’s life (whole life).

With a fixed term insurance product you will pay premiums every month or year until the policy ends or the insured dies. Like all other term life insurance policies, if the insured individual doesn’t die during the policy term, the policy ends and no premiums are refundable.

A key benefit of having a shorter term on an insurance policy is that the premiums will cost less.

However, opting for short term life cover could work out expensive in the long run if the policy term ends before the insured policyholder leaves their place of employment.

If a policy expires before you want the protection to end (i.e. the employee is still working at your firm), then the policy may have to be renewed and this will usually result in much higher premiums as they will of course be much older by then.

The best way to decide on the term of a life insurance policy is to consider how long the insured will be critical to the performance of your business, taking into account how much your company can afford to spend on premiums.

Many employers take out term life policies to run until the insured’s retirement age.