A group income protection scheme pays out a regular income if an employee is unable to work due to long-term sickness or disability
It is typically arranged to pay out a benefit equivalent to 50% to 60% of an employee’s basic salary if they are unable to pursue their own occupation – as opposed to simply any occupation. Benefit payments start at the end of an initial ‘deferred period’ , which commonly lasts for either 13 or 26 weeks
The payments continue until the employee is able to return to work or, should this not be possible, until a specified retirement date, usually state retirement age. But there is also now a trend towards low-cost schemes that only pay out for a maximum of two to five years
Premiums are paid by the employer, but this does not give rise to a P11D liability for the employee. Benefit payments are, however, subject to Income Tax. They are paid initially to the employer, who distributes them net to the employee via PAYE
Because a ‘free cover limit’ enables eligible employees to usually join the scheme without having to provide medical evidence, enrolment tends to be a relatively straightforward process and members can be covered for pre-existing conditions – which could have resulted in them being declined or subject to exclusions or premium loadings for an income protection policy in the individual market
Furthermore, group income protection provides far more than just the core insurance mechanism. There are so many wellness add-ons that it effectively offers a free mini occupational health department
Early intervention and rehabilitation services, which can provide access to everything from physiotherapists to occupational therapists, can often ensure that employees are back at work before the end of the deferred period – and in some cases may even pay for private operations
Other bells and whistles on group income protection schemes can include online wellness advice, mental health support, virtual GP services and employee assistance programmes (EAPs) – which can offer 24/7 confidential and impartial stress counselling and a range of other useful benefits like legal support, debt management advice and critical incident support
Significantly, many of these added-value features have proved especially useful during the recent pandemic because they can be accessible to those working from home. In particular, they have helped many employees to combat Long COVID — which can impact on any part of the body and lead to mental health problems
It is important to regularly review the income protection scheme you are offering to ensure it remains the most appropriate and competitive for your workforce
Group income protection providers are continually altering their attitudes towards particular types of risk, so your scheme demographic and claims experience could result in other insurers being able to quote more competitive rates than your current one
Changes to the ranges of added-value benefits that different insurers are offering are also occurring at a rapid pace, so it is important that what is available in this respect is also taken into account. Some insurers, for example, have started offering virtual health apps that provide considerably more than EAPs
Market reviews, which should ideally start four to six weeks before renewal, can include a benchmarking exercise to indicate the proportion of competitors that offer income protection, and whether this is standard cover until retirement date or a limited-term format
If they are offering cover to state pension age and the cost is prohibitive, switching to limited term cover for say 3 or 5 years would reduce the cost significantly. Crucially, limited-term schemes still retain access to the full suite of added-value benefits
To provide the best experiences, we use technologies like cookies to store and/or access device information. Consenting to these technologies will allow us to process data such as browsing behaviour or unique IDs on this site. Not consenting or withdrawing consent, may adversely affect certain features and functions.
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
The technical storage or access that is used exclusively for statistical purposes.The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.