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Group Income Protection

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If an employee becomes sick or injures themselves too severely to work, Group Income Protection will provide them with a monthly income to supplement their lost earnings while they are in recovery.

  • It is designed to help manage long-term sickness absence more effectively.
  • Pays a percentage of the employee’s gross pay – typically up to 80%.
  • Any claim is paid gross to the employer who then deducts tax and National Insurance before passing it on to the employee via their payroll.
  • As an employer, providing a guaranteed income for employees unable to work due to illness or injury allows you to financially support them 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?

An employee is entitled to Statutory Sick Pay if they are under a contract of service with you and are sick for at least 4 days in a row. This includes weekends, bank holidays and days that they do not normally work.

As long as their earnings are at least £116 a week (2019/20), they are entitled to the standard rate for statutory sick pay at £94.25 a week (2019/20) for 28 weeks.

Thereafter, if they’re still ill, they move on to Employment and Support Allowance or ESA, as well as potentially a range of other state benefits to supplement their income.

Providers can treat ESA differently so it is important check the policy terms as it can be deducted off of the gross figure paid out on the Group Income Protection scheme.

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 for a considerable time period.

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

Providing a Group Sick Pay Insurance scheme for your employees not only provides them with the financial support they vitally need when suffering a long term illness. It can also connect them with valuable advice services – known as employee assistance programs (EAPs) – that will help them through their recovery and speed up their return to work.

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How Does Group Sick Pay Insurance Work?

As the policy is owned and paid for by the employer, any benefits that are claimed will be paid to the organisation rather than directly to the employee in need.

The benefit will first need to be processed through PAYE, as if it is part of an employee’s salary, and after this it is the responsibility of the employer to pay the benefit to the employee.

Key Company Sick Pay Insurance Policy Options

There are a range of factors which affect the cost of your premiums, some relating specifically to your organisation and others relating to the level of cover.

Level of Cover

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

When choosing the appropriate level of cover for your employees you will have a policy Free Cover Limit. If the level of cover an employee receives would exceed this limit, they will be obligated to provide details of their medical history.

When this happens, the cost of their policy may be increased if they have pre-existing conditions or certain health problems may be excluded. This tends to only affect the highest-paid individuals within an organisation – in reality, it’s rare to exceed the free cover limit.

Deferred Period

In order to claim benefits from a Group Income Protection scheme, an employee will need to be ill or injured and out of work for a period longer than the chosen 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 at between 13 and 52 weeks, although shorter and longer deferred periods are available depending on your insurer.

The deferred period is often aligned with occupational sick pay because employees cannot claim sick pay and Group Income Protection benefits at the same time. Choosing a longer deferred period will lower the premiums.

Include National Insurance and Pension Contributions

As a benefit, Income Protection payment gets paid gross to the employer, who then deducts Tax and National Insurance from the payment.

Due to the benefit still being processed through PAYE, there is an option on the policy to cover employer National Insurance and employer pension contributions if required.

The Importance of ‘Own Occupation’ Cover

Your employees’ ability to claim benefits from a Group Sickness Insurance plan is determined first and foremost by the definition of incapacity used by the insurer.

The right definition of incapacity will ensure that employees can claim when poor health prevents them form working in their specific role, whereas another definition of incapacity may require them to take on a different occupation before they can make a claim.

  • Own Occupation
    Employees can claim monthly benefits from the policy providing their health condition prevents them from carrying out their specific occupational duties.
  • Suited Occupation
    Employees can claim monthly benefits providing their health condition renders them incapable of carrying out the duties of their own occupation as well as other occupations they are qualified for.
  • Any Occupation
    Employees will only be able to claim monthly income if their health problem is severe enough to prevent them from working entirely.
  • Activities of Daily Living
    Employees will need to go through an examination to determine if they are eligible to claim their Income Protection benefits and will need to fail a certain number of everyday tasks such as climbing stairs or signing their name to be qualified as ‘incapacitated’.
Nadeem Farid Head of Employee Benefits at Drewberry

Beware as some insurers also offer a combined definition of incapacity.

This means that for a set number of months while employees are receiving benefits Own Occupation cover will be used and then Suited or Any Occupation Cover will be used if they still have not recovered by the end of this period.

Nadeem Farid
Head of Employee Benefits at Drewberry

How Much Does Group Income Protection Cost?

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

Level of Cover / Salaries

The level of cover is a key factor when it comes to the cost of your premiums. The greater the percentage of an employee’s salary which is covered the greater the premiums.

There are options available to vary the cover, including covering 50% of the employee’s salary and allowing them to individually purchase cover up to 80% of their income.

Alternatively, you could look at providing varying levels of cover for different grades of employees within the organisation.

Also, given that the benefit paid is a proportion of employees’ salaries, if you have a large number of high-earning employees your premiums will be higher because they’ll be receiving a larger benefit should they claim.

Age

As with any protection policy, age can be factor into the cost. We all know that the older we become the more aches and pains we tend to suffer and the more likely we are to be off work for a considerable period of time.

As such, if your workforce is made up of older workers, the premiums are likely to be higher compared to a company with a younger workforce.

Length of Payout

With Income Protection, you can choose to pay benefits if someone is off work for a set period (often 1, 2 or 5 years) or indefinitely, until that person’s retirement age.

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

Number of Members

The size of your company and the number of people that you would like to cover with your Income Protection Insurance scheme will always affect the cost of your policy.

This said, note that some insurers may offer a discount for larger group schemes – speak to one of our experts to see if your company is large enough to qualify.

Industry

Different occupations can pose different health risks for employees that may make them more likely to claim on your company policy.

Some industries are more susceptible to stress and mental health conditions while others tend to have more physical risks.

The more likely it is that employees will be injured at work or need to take some time off, the more you will need to pay in premiums.

Residence / Working Abroad

Another factor that will impact the cost of premiums is where an employee is based permanently for work, or if they frequently travel to certain places as part of their job.

Such places include high-risk countries with areas of internal/political conflict etc. Living in or travelling to such countries will increase the cost of premiums.

How is Group Income Protection Insurance Taxed?

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

A personal policy is paid for using your wages, which is income after you have paid tax and National Insurance. This detail means you can claim your Income Protection benefits completely tax-free.

However, as Group Income Protection is paid for by the employer and employers can reclaim corporation tax on premiums for a policy, the benefit is typically taxable on a claim.

Generally, Group Sickness Insurance is not usually treated as a taxable P11D benefit in kind for most employees in most instances. (While there may be an exception for those with a ‘proprietorial interest’ in the company, this is a complicated matter that it’s best to consult an expert about.)

Income Protection benefits intended for the employee are first paid out as a salary continuance to the employer.

The employer then transfers this payout to the employee in need via the PAYE system. It is during this process that the insurance benefit will be taxed in the same way as the employee’s standard income.

When it comes to taxation of Group Income Protection, the best course of action is to check with your accountant to determine how premiums will be treated for tax purposes.

Compare UK’s Best Group Income Protection Providers

It’s not as easy to compare Group Income Protection policies as it is to compare some other types of protection insurance. This is because the price is highly dependant on the group you’re covering and the policy options you choose.

aviva

Aviva

  • Covers up to 80% of employees’ earnings
  • Choose a long-term payout term or a limited payout term of 2, 3, 4, or 5 years
  • Minimum number of employees 5 (to get a free cover limit)
  • Choice of deferred periods: 13, 26, 28, or 52 weeks
  • Definition of incapacity options: Own Occupation / Suited Occupation
canada life

Canada Life

  • Covers up to 75% of employees’ earnings.
  • Limited payout term of 2, 3 or 5 years
  • Minimum number of employees: 5 (to get a free cover limit)
  • Choice of deferred periods: 13, 26, 28, 41 or 52 weeks
  • Definition of incapacity options: Own Occupation / Suited Occupation
ellipse

Ellipse

  • Covers up to 80% of employees’ earnings.
  • Choose a long-term payout term or a limited payout term of 2, 3, 4, or 5 years.
  • Minimum number of employees: 5
  • Choice of deferred periods: 8, 13, 26, 28, 41, or 52 weeks.
  • Definition of incapacity options: Own Occupation / Suited Occupation / Activities of Daily Living.
legal & general

Legal & General

  • Covers up to 80% of employees’ earnings
  • Choose a long-term payout term or a limited payout term of 2, 3 or 5 years
  • Minimum number of employees: 10
  • Choice of deferred periods: 13, 26, 28, 39, 52, or 104 weeks
  • Definition of incapacity options: Own Occupation / Suited Occupation / Activities of Daily Living
unum

Unum

  • Covers up to 80% of employees’ earnings
  • Choose a long-term payout term or a limited payout term of 2, 3, 4, or 5 years per claim
  • Minimum number of employees: 5
  • Choice of deferred periods: Between 8 and 52 weeks
  • Definition of incapacity options: Own Occupation / Any Occupation
zurich

Zurich

  • Covers up to 80% of employees’ earnings as standard, but can be increased to 80% in certain circumstances
  • Long-term payout or limited to 2, 3, 4, or 5 years per claim
  • Minimum number of employees: 20
  • Choice of deferred periods: 8, 13, 26, 28, 41 or 52 weeks
  • Definition of incapacity options: Own Occupation / Suited Occupation / Any Occupation

 

Get Expert Group Income Protection Advice

With our expertise in the group insurance industry and your knowledge of your organisation, together we can design the most appropriate cover for your employees and ensure the most competitive premium from the leading insurers across the UK market.

Why Speak to Us?

We started Drewberry because we were tired of being treated like a number and not getting the service we all deserve 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.

  • There is no fee for our service
  • We are independent and impartial
    Drewberry isn’t tied to any insurance company, so we can provide completely impartial advice to make sure you get the most appropriate policy based solely on your needs.
  • We’ve got bargaining power on our side
    This allows us to negotiate better premiums for you than you going direct yourself.
  • You’ll speak to a dedicated expert from start to finish
    You will speak to a named expert with a direct telephone and email. No more automated machines and no more being sent from pillar to post – you’ll have someone to speak to who knows you.
  • Benefit from our 5-star service
    We pride ourselves on providing a 5-star service, as can be seen from our 2274 and growing independent client reviews rating us at 4.92 / 5.
  • Benefit from the protection of regulated advice
    You are protected. Where we provide a regulated advice service we are responsible for the policy we set-up for you. Doing it yourself or going direct to an insurer won’t provide this protection, so you won’t benefit from these securities.
  • Claims support when you need it the most
    You have support should you need to make a claim. The most important thing when it comes to insurance is that claims are paid and quickly. We are here to support you during the claims process and make sure it’s as smooth and stress free as possible.
Nadeem Farid Head of Employee Benefits at Drewberry

If you are looking to implement a Company Income Protection scheme or review an existing arrangement then we are in a great position to help you.

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

Nadeem Farid
Employee Benefits Expert at Drewberry

Extremely satisfied with the help and advice from Drew, since the beginning him understood what I was looking for and have the patience to help me out with all my questions and doubts. Didn’t tried to be push or annoying calling me all the time like so many did before. At the end we find the perfect medical policy for me and my daughter that covers everything that we need. I more than recommend them and if in the future I need something else for sure I will contact them again. Giving only 5 stars because I can’t give 6!!!!

Natasha Caversan Mucci
07/06/2019
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