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Normandin Beaudry

Group critical illness insurance

LinkedIn

There, in black and white

Bulletin NB Vol. 9 N. 3, May 2006

Critical illness insurance has been available on the Canadian market in the form of individual insurance since the mid-1990s. As for group critical illness insurance, this is a relatively new product that has been gaining popularity over the past few years.

Product description

As with individual critical illness insurance, group critical illness insurance guarantees the payment of a lump sum amount following the diagnosis of a covered critical illness. For example, the lump sum amount could be used to cover the costs of home renovations, homemaking services, treatments not cover under private insurance plans, etc. The lump sum amount is generally payable if the insured survives for a predetermined period (e.g. 30 days) following diagnosis.

A number of insurers offer various levels of protection, the most basic covering three or four illnesses and the most comprehensive covering more than 25 illnesses. Below is a list of illnesses often covered by this type of product: 


  • Alzheimer’s Disease
  • Heart attack
  • Parkinson’s Disease
  • Cancer
  • HIV
  • Renal disease
  • Coma
  • Loss of speech
  • Severe burns
  • Coronary bypass
  • Multiple Sclerosis
  • Stroke
  • Deafness/blindness
  • Paralysis
  • Vital organ transplant

Features of critical illness insurance 

Most insurers offer basic coverage for the insured as well as optional coverage for the insured, his/her spouse and dependent children. Some insurers also cover certain childhood diseases such as Down Syndrome, autism and cystic fibrosis for insured dependent children. 

Within their critical illness insurance contract, a more limited number of insurers offer additional benefits, including coverage in the event of mutilation resulting from a critical illness, cost of living adjustments to the benefit amount and the "Best Doctors" service. The "Best Doctors" service is an independent service that allows the insured to obtain a second medical opinion from a specialist within the "Best Doctors" database, which includes over 50,000 specialists worldwide. The "Best Doctors" service is more common on the individual market, but is also offered under group insurance plans by a few insurers. 

Insureds do not need to provide evidence of insurability when critical illness insurance is mandatory. However, most insurers require proof of good health for any insurance amount above the amount without evidence of insurability as well as for optional insurance amounts. Most critical illness insurance contracts also include a pre-existing condition clause with respect to the covered illnesses. 

Pricing 

Costs for group critical illness insurance vary based on the demographic composition of the group as well as the coverage amount. For example, the annual cost for a group with an average age of 45 and a coverage amount of $50,000 ranges between $300 and $500 per insured. 

Tax treatment 

The employer’s participation in paying critical illness premiums creates tax implications for the employee. Below is an overview of the tax treatment at each level of government. 


 Premiums paid by the employerBenefits
 

Government levelFor the employerFor the employeeFor the employee

FederalDeductible expenseDoes not constitute a
taxable benefit(1)
Non-taxable
QuebecDeductible expenseConstitutes a taxable
benefit
Non-taxable

1 The Canada Revenue Agency (CRA) has not, however, made an official decision on this matter. Each employer must submit its critical insurance policy to the CRA to obtain a decision based on the details specific to each case.

 

Please feel free to contact us for additional information.

514.285.1122
 
630, René-Lévesque Blvd. West, 30th floor
Montreal, Quebec, H3B 1S6