We all like to think we are irreplaceable at work, but some business executives and owner-managers do leave a substantial ‘hole’ when they are absent. That can make it vital to be able to answer the question, ‘What is sickness insurance?’.
Organisations operating on a competitive knife edge always need to take steps to manage their financial risks., such as finding robust business income protection insurance that avoids survival-threatening dips in revenue.
The individuals who run organisations also need to put their own financial ‘safety nets’ in place, such as Personal Protection Insurance and relevant life cover.
So how does that differ from sickness insurance for businesses or individuals?
What is sickness insurance?
Many examples of relevant life cover policies only pay out when a death occurs.
Illness – though temporary – can still have a serious impact on a business’s success. Particularly if the person involved plays a significant role, and the organisation struggles to delegate their tasks effectively. Not least as there can be confusion if the illness was sudden, leaving projects half-finished, and uncertainty when they are coming back.
How would sickness insurance help?
This is an executive income protection policy that activates when the named person becomes too ill – or injured – and cannot do their job for a significant amount of time. The type of cover provided can be tailored to the individual and their role of course, and can also be either a monthly benefit or a lump sum payment.
You will sometimes see it referred to as Critical Illness insurance.
What constitutes sickness – or critical illness – can vary from policy to policy, as can the risk categories, premiums and claim boundaries.
For example, critical illness cover will have a clear list of conditions that are eligible for a claim, whereas serious illness cover will have a wider range of issues that constitute sickness or injury. You can also combine Life and Critical Illness cover in one policy.
Will employee sickness be an issue post-pandemic?
COVID-19 brought widespread disruption to workforces and caused serious difficulties for many organisations. However, don’t be fooled into thinking that post-pandemic absenteeism will not be an issue for businesses.
Let’s explore some relevant background statistics to prove this.
Figures announced by the Chartered Institute of Personnel and Development (CIPD) show that in 2020 employees in the UK averaged 5.8 sick days each. Yet, in 2019 it was 5.9 and in 2018 the average was 6.6.
In fact, the CIPD reports that workplace absence due to sickness is now lower than at any other point in 20 years of surveys!
Clearly, the move to working from home may have helped reduce the number of sick days in the UK workforce. This means that as life gets back to normal and people return to the office, the absenteeism may start to go upwards again.
This is especially true as UK charity MIND has described the pandemic as a ‘mental health emergency’. Employers may experience some serious role gaps as key personnel deal with the long-term effects of the COVID-19 crisis. Including the stress of getting organisations ‘back on track.
No organisation is ‘immune’ to the knock-on effect of having key personnel off work. Making sickness insurance something you are advised to consider.
Which businesses need sickness insurance?
Often individuals take out sickness insurance, but businesses can also invest in Critical or Serious Illness cover for employees. The latter would give the employer a financial ‘crutch’ to get them through a period of severe disruption and cost.
Business owner-managers should certainly take steps to build their knowledge of what sickness insurance is. If you are self-employed, being unable to work due to sickness or injury can cause serious business interruption.
One of the alternatives you could consider to sickness insurance for an especially vital person in your organisation is Key Person insurance. This too helps to manage the risks of a major decision maker, technician or skilled professional becoming unavailable for a significant period of time.
This video explains what executive income protection insurance is, to help you explore how that differs from sickness related cover.
How to arrange sickness insurance
As with many other forms of personal and executive income protection insurance, there is no one size fits all solution. Off-the-shelf policies can leave you vulnerable to poor risk management and ineligible claims.
Equally possible is that you may end up paying for cover you don’t really need if you don’t get advice on sickness insurance policies.
WIS Business Protection works with clients to find the most appropriate, competitively priced policies to keep your business ‘healthy’, even when the worst happens.