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.
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.
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
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.