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What is critical illness insurance?

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Critical illness insurance is a type of insurance that’s paid out to an employee if they are diagnosed with a specific critical illness and aren’t able to work because of their condition.

Critical illness insurance can be incorporated into an employee’s benefits package; the cost of the insurance is deducted from their paycheck. In global payroll, insurance is subject to different regulatory policies and tax laws.

How does critical illness insurance work?

As part of the agreement, the policyholder (employee) agrees to pay a premium to the insurance company (the frequency of the payment will depend on the agreement). In the case of being diagnosed with a critical illness, they will receive a lump sum payment to use as they see fit.

The types of medical conditions covered in the insurance will depend on the policy. If the policyholder is diagnosed with one of the conditions covered, they can submit a claim to the insurance company. If approved, they’ll receive the one-time payment.

Which illnesses are covered by critical illness insurance?

The illnesses covered by critical illness insurance will vary depending on the policy. Common conditions that tend to be included are cancer, heart attacks, strokes, and organ failure.

Some policies may also include less common conditions, like motor neuron disease or severe lung or liver disease.

Difference between critical illness, health and life insurance?

Sometimes the definitions for critical illness, health, and life insurance can get a little blurry. We go into the definitions of each below:

Critical illness insurance: gives the policyholder a lump sum payment in the event of their being diagnosed with a critical illness.

Life insurance: a payout to the policyholder’s beneficiaries upon their death.

Health insurance: covers the costs of medical and healthcare services – relevant to conditions not necessarily life threatening.

Managing critical illness insurance for a global workforce

Managing critical illness insurance becomes an especially challenging subject when dealing with a global workforce.

For one, specific medical conditions covered in this type of insurance may differ from country to country. Meanwhile, regulations and tax laws surrounding this form of insurance also change depending on location.

A payroll and payments platform can help not only with automating the process and ensuring the funds are paid in the relevant currency, but also in ensuring that compliance requirements are met.

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