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A Guide to Buying Group Income Protection

A Guide To Buying Group Income Protection

We have found during benefit reviews; Group Income Protection is one of (if not the) most sought-after insurance by employees. 

With only about 17,500 policies in the whole of the UK, most employees have understandably never heard of it or even know what it covers.

In this guide we are going to explain Group Income Protection and help businesses establish the right policy for the best price.

What is a Group Income Protection Insurance Policy?

Group Income Protection is an insurance policy that is arranged by businesses to provide a fixed monthly income for a set time to its employees in the event of an accident or sickness.

As statutory sick pay is only £95.85 per week, most employees will struggle financially and try to rush back to work before they have fully recovered.

Providing Group Income Protection allows any sick or injured staff to fully recover at their own pace and use the support services the policy allows to assist with their recovery. 

How to choose the right scheme set up for a Business?

You need to seek advice from an insurance broker and establish your businesses risk appetite and budget to understand what’s right for your business, but we will highlight the main considerations.  

Group Income Protection does not cover 100% of an employee’s monthly salary as there needs to be an incentive for staff to return to work when they have recovered. 

You can provide a maximum of 80% of their income per month and include pension or national insurance contributions to be included.

Set criteria can be applied to incentive senior staff, attract talent or reward staff loyalty. For example, you could provide 50% salary for the first two years of employment then increase to 70% cover after they have met the two-year service criteria.

Same goes for the payment period, you can choose for the policy to pay for two years, five years or even until retirement and set different levels for seniority etc. but remember the longer the payment period the more expensive your policy will be.

Before the policy starts to pay a deferred period must be chosen, which is the designated period an employee must be absent from work before payment kicks in.

Deferred periods will commonly be either 13, 26 or 52 weeks dependent on the businesses internal sick pay policy and risk appetite.

There are numerous other factors such as covering pension/national insurance contributions, offsetting state benefits, setting an escalation rate etc. which will be unique to a business’s goals.

Is Group Income Protection expensive?

It’s the question everyone wants to know when choosing a policy but it depends on the number of employees, average age of the workforce, industry you work in, where your located, the scheme design and a lot more.

Below we have provided some price examples for small businesses which all have no pension/national insurance contributions, no escalation, no offset etc. included.


We must caveat the above could be significantly different for your business as the salary being covered will vary from company to company which impacts the pricing as covering more/less.

Unfortunately, due to the complex nature of businesses with more employees, the prices are very sporadic, so we have not included the examples to avoid confusion.

Out top tip to keep the price down is by working with a broker that does not charge a fee and instead is paid commission by the insurer as could save hundreds or thousands each year.

Do Companies have to offer it to all employees?

It is the businesses choice which staff are covered under the policy, they cannot pick and choose who at the company gets it but instead set categories.

Category examples could be Directors, Managers, Sales, Administration and Service Period but a business does not have to provide the same level of benefit to each category as they may want to provide higher benefits to more senior or long serving staff.

If you seek the advice of an employee benefits specialist, they will be able to run through numerous quotes for you as we have seen in the past it can work out cheaper including more staff then less. 

Sometimes including categories which have a younger workforce such as administration or sales, can potentially bring the premium down because decreasing the average age of the scheme makes it a more attractive risk for the insurer. 

How do claims work on Group Income Protection Insurance?

When you have arranged your policy, you need to remember for future absences that all the insurers provide an early intervention service to help support your staff back to work.

If yourself of any employees have a serious illness or accident and it is likely they are not going to be able to return to work for longer than the deferred period- contact your broker straight away.

Insurers will want to help support the employee back to work as it reduces the absence period, which then lessens the amount the insurer pays for the claim.

Group Income Protection providers will look at funding private treatment, completing workplace assessments, assisting with role re-training and many more services to assist with any long-term workplace absences.

When choosing the right insurer for your policy, it is vital to ensure the insurer has a proven track record at managing early intervention support and providing rehabilitation services.

What should we know about Group Income Protection taxation?

Every company is different and as we are an insurance brokers, we always advise our clients to seek advice from their accountant, tax expert or HMRC before proceeding.

Businesses should be aware that when providing Group Income Protection to their workforce, they will usually be able to claim the premiums as a business expense against corporation tax relief.

It is also worth pointing out that Group Income Protection policies are not treated as a P11D benefit.

Employees should know that when a successful claim is made, the benefit is paid to the business to be taxed as per usual employee earnings.

Should I pay for a Group Income Protection comparison?

Hooray Health & Protection do not charge any fee no matter the size of the client as we are paid a commission by the Group Income Protection insurers for placing business with them.

If you are currently paying a fee or considering a new policy why not call us on 01273 222805 for a free comparison and see how much you could potentially be saving yourself.

Charlie Cousins

Founder and Director of Hooray Health & Protection, Charlie Cousins has enjoyed a career in the insurance and financial services industry spanning over the last ten years.

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