Critical illness insurance is a valuable tool for protecting your business and your team from the financial impact of serious health events. However, not all policies are structured the same way. For business owners looking to offer coverage for themselves or their key people, two options often come up: standalone and shared interest critical illness insurance.
Understanding the differences between these structures is key to choosing the right solution for your business and your long-term goals.
Understanding the Two Options
Standalone critical illness insurance is a traditional policy—one party pays the premium, owns the policy, and receives the benefit. It can be owned by the business or the individual, and it’s typically used for straightforward protection.
Shared interest critical illness insurance involves both the business and the individual sharing the cost and the benefits of the policy. These arrangements are formalized with a shared interest agreement and can provide both protection and a long-term incentive.
How Standalone Policies Work
With a standalone policy, the business usually pays the full premium and may own the policy. If the covered person is diagnosed with a critical illness, the benefit is paid either to the business or directly to the individual—depending on how the policy is set up.
This approach is simple to administer and often used for:
- Owner-operator coverage
- Key-person protection
- Buy-sell agreement funding
The benefit may be used for business continuity costs, executive replacement, or any need that arises due to illness.
Best for: Business owners who want full control of the policy or are insuring a key person strictly for business risk protection.
How Shared Interest Policies Work
Shared interest policies divide the policy’s benefits and premiums between the business and the insured individual. Typically:
- The business pays for the critical illness coverage.
- The employee pays for the return-of-premium (ROP) benefit.
- If a critical illness occurs, the business receives the benefit.
- If no illness occurs, the employee gets their portion of the premiums back after a set period (e.g., 15+ years).
These arrangements are formalized in a shared interest agreement that outlines:
- Who owns which part of the policy
- Who pays for what
- How the benefits are distributed
Best for: Business owners who want to offer a tax-efficient, long-term benefit that doubles as an executive retention strategy.
Comparing the Two Approaches
| Feature | Standalone Policy | Shared Interest Policy |
| Premium Payment | Business | Business & Employee |
| Policy Ownership | Business or Individual | Shared per agreement |
| Payout if Illness Occurs | Business or Individual (based on setup) | Business receives benefit |
| Return of Premium | None or goes to business | Goes to employee |
| Use Case | Key-person protection, owner coverage | Executive retention, incentive plan |
What to Consider When Choosing
The right structure depends on your goals:
- Do you need simple, straightforward protection for the business?
- Are you looking to reward or retain key executives?
- Is it important to provide long-term incentives without increasing salary?
- Do you prefer clean ownership or are you open to shared agreements?
Both policies offer strong protection—but they solve different problems.
Plan with Confidence
Standalone and shared interest critical illness insurance each have their place in a well-structured benefits strategy. One offers simplicity, the other a more strategic edge. If you’re not sure which model fits your business, we can help.
Finuity Wealth helps business owners design critical illness solutions that protect your bottom line and reward the people who matter most. Let’s build a plan that fits.
