What is Group Income Protection? Do We Need It?

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Group Income Protection provides your employees with a continued monthly income should they suffer an illness or injury which prevents them from working.

  • Manage long-term sickness absence more effectively
  • Cover a percentage of the employee’s gross pay – typically up to 80%
  • A claim is paid to the employer who processes payment via payroll
  • Support your employees through what can be an emotionally, physically and financially difficult time
  • It’s a highly-valued employee benefit which acts as an important means of staff retention and attraction.

Is Group Income Protection Insurance Worth it?

Employees are entitled to Statutory Sick Pay if they are sick for at least 4 consecutive days.

With earnings of at least £116 a week (2020/21), they are entitled to the standard rate of SSP at £95.85 a week (2020/21) for 28 weeks.

SSP to Employment & Support Allowance

After 28 weeks they move to Employment and Support Allowance or ESA. In addition to ESA there are a range of other state benefits that could supplement their income at this point.

While these benefits may offer short-term financial support, this limited level of cover would leave many in financial difficulty should they be off work long term.

Supplementing SSP with Group Sick Pay Insurance

Employers who want to further support their employees will often supplement SSP with some form of occupational sick pay.

Providing a Group Sick Pay Insurance scheme for your employees not only provides them with long term financial support but it can also connect them with valuable additional services.

  • Employee assistance program (EAP)
  • 24/7 Remote video GP service
  • Second medical opinion service
  • Counselling helpline
  • Rehabilitation program
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How Does It Work & What Does Group Income Protection Cost?

The limited company or limited liability partnership owns and pays for the Group Income Protection Insurance.

Should an employee or partner suffer an illness or injury which lasts longer than the deferred period it will trigger a claim. The employer receives the claim each month which they then process via PAYE.

There are a range of factors that will affect the cost of your company sickness insurance policy. While you can reduce premiums by making decisions about the level of cover, there are some factors that cannot be controlled.

Key Policy Options

Level of Cover

Most insurers will allow you to protect between 50%-80% of gross salary.

The level of cover is a key factor when it comes to the cost of your premiums. The premium increases inline with the proportion of your employee’s salary you wish to cover.

Deferred Period

The deferred period is the time from which an employee is initially off work to the time when the insurer starts paying out a claim. It is often set between 13 and 52 weeks.

Tip: It makes sense to align the deferred period with any employer paid sick days. The longer the deferred period the lower the monthly premiums.

Length of Payout

Benefit payments can be limited to 1, 2 or 5 years or until retirement age.

The longer the benefit payment period you choose, the higher the cost of premiums.

Include National Insurance and Pension Contributions

In addition to gross salary you can opt to cover employer National Insurance and employer pension contributions. These options will increase the overall cost of cover. 

Premium Frequency

A small discount can be obtained if you are able to pay your premiums annually rather than monthly.

The Importance of ‘Own Occupation’ Cover

Opting for Own Occupation cover ensures your employees can make a claim should the accident or sickness prevent them from carrying out their specific job role.

There are alternative lesser definitions to look out for when comparing options however at Drewberry we would not recommend these.

  • Suited Occupation
    The employee must be incapable of carrying out the duties of their own occupation or any other job they are qualified for.
  • Activities of Daily Living
    The employee must be incapable of completing a certain number of everyday tasks such as climbing stairs or signing their name.

Factors You Can’t Control

Age

The older we become the more aches and pains we tend to suffer and the more likely we are to suffer long term sickness. The older the population you wish to protect the higher the premium.

Industry & Occupation

There are some industries which are considered higher risk either because of the physical or mental stress.

For instance, builders are considered to be at higher risk of suffering an accident. Teachers on the other hand have a higher risk of mental health problems. Industries which pose a higher risk of claiming have a higher premium to pay per employee.

High risk travel

If you have staff who travel a lot or spend time in areas of internal/political conflict etc. it may result in higher premiums.

How is Group Income Protection Insurance Taxed?

Business Income Protection is not taxed in the same way as Personal Income Protection.

A personal claim is tax-free because the premiums are paid from net income.

However, as Group Income Protection is paid for by the employer who can expense the cost, a business claim is typically taxable.

Is Group Income Protection a P11D Benefit in Kind?

It is not normally considered a P11D / benefit in kind. Typically there’s no additional tax to pay in most circumstances from the employees’ standpoint.

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Common Group Income Protection Questions

  • Does Group Income Protection replace Statutory Sick Pay?

    Group Income Protection is designed to work in tandem with SSP and any occupational sick pay you may provide.

    The minimum deferral period, or waiting period, on Group Sickness Insurance is 13 weeks. As a result, the employer is responsible for the first 13 weeks of any illness or injury through a combination of SSP and any company paid sick leave.

  • Do employees still receive ESA if they claim?

    Yes they can, it’s because ESA is not means-tested but based on the employee’s national insurance contributions.

    Benefits rules change from time to time so you would need to clarify this with Jobcentre Plus.

  • As a small business can we get Group Income Protection?

    Typically three to five employees are required for Company Income Protection scheme.

    If you don’t have enough employees for a Group Income Protection scheme, then you do have another option: Executive Income Protection. This is common where the company only consists of a couple of directors who want similar cover to a group scheme.

    If you are a self employed sole trader you are not eligible for executive cover as it must be owned by limited company.

  • Does it fall under TUPE rules?

    Group Income Protection falls under the TUPE rules and can be transferred to ensure continuation of cover.

  • Do employees need to have a medical?

    With company sick pay insurance so long as the employee’s level of cover is below the schemes free cover limit they will not require any medical underwriting.

  • How do I make a claim on Group Income Protection?

    Both the employer and the employee are required to complete a claims form which can be downloaded from the insurer’s website or submitted online.

    A claim should be submitted as soon as feasibly possible to ensure it can be processed, approved and ready to be paid on time.

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Compare UK’s Best Group Income Protection Providers

Comparing Group Income Protection policies is not always that easy, it’s highly dependant on the group in question and the policy options you choose.

We work with all the leading UK insurers to obtain the most competitive quotes including:

  • AIG
  • Aviva
  • Canada Life
  • Legal & General
  • Metlife
  • Unum
  • Zurich

Get Group Sickness Insurance Quotes & Expert Advice

With our expertise and your understanding of your firm we can design the best employee benefits package for your workforce.

Why Speak to Us?

We started Drewberry because we were tired of being treated like a number. We all deserve a first class service when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to talk to us.

Simply pop us a call on 02084327333 or email help@drewberry.co.uk.

Josh was brilliant, very quick process, simple, regular updates and reliable. Would highly recommend.

Lisa Stanway
12/05/2020
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Or call us on 0208 432 7333

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