Group income protection insurance provides long term sick pay to employees who are unable to work through illness, injury or disability.

Many policies do more than provide a regular income to those prevented from working for a prolonged period. A group income protection plan will usually also include benefits which can help minimise an organisation’s sickness absence rates.

Group income protection plans can be arranged for SMEs with as few as two employees through to major corporates with thousands or tens of thousands on their payroll.

GRiD research shows that in 2017 the average value of a group income protection insurance claim payment was nearly £24,257. The main causes of claims were cancer and mental illness.

What is group income protection insurance?

Group income protection plans are designed to enable an employer to provide long term sickness pay to employees. Policies provide a financial benefit – usually as a regular monthly income – to those who are unable to work for a prolonged time due to either illness or injury.

This benefit may be paid for either a fixed period or until an insured member reaches a certain age.

Some group income protection cover may be structured to also offer an initial or final lump sum.

An initial lump sum may be provided after an employee has been absent from work for a defined period of time – typically 14 days – due to a defined medical condition such as cancer, a heart attack or stroke.

A final lump sum may be provided at the end of the term of regular monthly payments.

An insured member will need to have been absent from work for a specified period before they are eligible to claim. Payments will be made once this “deferred period” has elapsed.

The benefit is paid to the employer who then awards it to their employee through the PAYE payroll system.

Many group income protection schemes include a free cover limit. This means that no medical underwriting is required for cover which falls below that limit.

Employers can also directly benefit. Group insurance protection cover can include National Insurance contributions and both long and short-term costs incurred as a result of an employee’s sickness absence.  These might include things like pension contributions and the employment of temporary or replacement staff.

Other benefits of group income protection plans

As well as providing long term sick pay, a group income protection plan may provide benefits to help prevent or minimise sickness absence.

These may include early intervention and rehabilitation support and services to speed an employee’s recovery from illness or injury. These could promote fast-track access to medical services such as physiotherapy or psychological treatment.

Expert second opinion medical services are also frequently incorporated within group schemes.

Members may also be able to receive support whilst in work to help them better manage their physical and mental wellbeing. These could include online and telephone counselling.

Many group income protection polices also incorporate an Employee Assistance Programme (EAP). These can assist employees in dealing with a range of health, financial and relationship issues.

With professional return to work case management another typical benefit, group income protection insurance can play a key role within a company’s wider absence management strategy.

Many policies also provide support to employers. These can include access to legal, health and safety and tax advice.

Why provide group income protection insurance?

There are a number of reasons why you might consider offering group income protection cover as an employee benefit.

Firstly, it can promote your “employer brand,” your reputation as an employer. A strong and positive employer brand can help you both recruit and retain staff.

It does this by providing reassurance to your employees. They know that thanks to their employer, if they need take a long-term sickness absence then they will receive what could be vital financial support.

Secondly, a group income protection plan can help minimise sickness absence and its associated costs. Benefits such as fast-track medical treatments, rehabilitation support and return to work programmes can help reduce the time a sick or injured employee is absent.

In addition, many policies include benefits which are designed to prevent and minimise long-term sickness absence itself.

They do so by providing access to a range of support services whilst employees are still in work. Early intervention care can also prevent short term becoming long term absence.

  • Research by the Chartered Institute of Personnel Development (CIPD) calculates the median cost of absence per employee is £522. (Absence Management Survey
  • The same CIPD survey found that stress, acute medical conditions (eg. heart attack, cancer, stroke) and mental health (such as clinical depression and anxiety) were the most common causes of long-term absence.
  • Group Risk Development (GRiD) reports that 2,989 people were helped back to work in 2017 before they reached the point of making a claim under a group income protection plan.

Group income protection tax treatment

Usually group income protection premiums may be offset against corporation tax.

Provision of income protection for employees is also not generally treated as a benefit in kind. This means that the employee will not be subject to a P11D tax liability.

It is important to seek specialist professional advice on the tax status of a group income protection scheme before you commit to it.

How much does group income protection pay out?

Group income protection plans are designed to pay a proportion of an insured members salary.

The proportion of salary payable will vary depending on the provider and level of cover chosen. It is usually between 50-75% of an employee’s gross taxable earnings. However, some policies will pay out as much as 80%. The total amount payable may be capped.

How do I compare group income protection schemes?

There are a number of group income protection providers. These include Aviva, Legal & General, Unum, and Zurich. Towergate Health & Protection have reviewed Canada Life’s Group Income Protection policy which is an example of the type of cover available.

Each provider offers different group income protection schemes with varying benefits.

If you add into the equation the differing needs and budgets of particular businesses, then making a group income protection quote comparison can be time consuming.

As a specialist group risk insurance broker, we’re here to help. Our advisors can offer you free, expert and impartial advice on the best group income protection scheme for your business.

They will look at the nature and size of your business and its specific needs. Then they will conduct a whole-of-market analysis of group income protection plans to find the most appropriate solution for your organisation.

Chase Templeton Limited is registered in England and Wales No. 3299980 – registered address: 5 Arkwright Court, Blackburn Interchange, Darwen, BB3 0FG. Towergate Underwriting Group Limited is registered in England and Wales No. 4043759 – registered address: Towergate House Eclipse Park Sittingbourne Road Maidstone Kent ME14 3EN.  VAT Registration No: 447284724.