As business owners, budgeting for your various necessities can be difficult. You need to pay your staff, your bills, and ensure your essential insurances are all paid on time, and that’s without even thinking about offering employee benefits.
In this article, we will discuss what Group Income Protection insurance is, why it is important to consider it in your budget, what affects the costs and answer the question ‘how much is income protection insurance?’ to ensure you know how to plan your budget to include it in your employee benefit offerings.
What is Group Income Protection Insurance?
Group Income Protection Insurance is an insurance policy that provides employees a financial safety net in case they were to become too ill or injured to be able to work. It acts as a replacement income, regularly paying a percentage of their salary until they reach the end of their fixed claim term, they have recovered enough to return to work, or until they retire - depending on the product term agreed when setting up the insurance.
Group Income Protection Insurance is cover that is offered by employers to their employees as part of a benefits package. It is designed to help both employers and employees in the event of a leave of absence. Employers don’t have to pay potential salary costs for work that isn’t being completed, and employees don’t have to worry about money when they should be focused on recovery.
Its value for businesses goes beyond just helping towards potential salary costs. Group Income Protection Insurance supports employees during their illness or injury, can help boost morale and could reduce staff turnover as employees feel encouraged and well looked after.
Why budgeting for Group Income Protection Insurance is important
Including Group Income Protection Insurance in your budget is a smart move for businesses that value their workforce. Group Income Protection Insurance is a valuable employee benefit, as it provides employees some financial support should the worst happen and they’re unable to work. This type of cover can also improve employee retention and morale, as staff members feel more supported, listened to and respected, making it a worthwhile investment.
What affects the premium costs?
When deciding whether offering Group Income Protection is financially viable for your business, and calculating where it falls within your budget, you need to have an understanding of how much it will cost.
Just like with other insurance policies, the cost of Group Income Protection insurance monthly premiums will depend on a number of different factors. Let’s explore some of the different criteria:
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Business type: The industry your business operates in plays a role in premium costs. High-risk sectors such as construction and manufacturing typically face higher costs due to the increased risk of claims.
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Location: Where your business is located may affect premiums due to variations in regional living costs and local regulations.
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Employee demographics: Factors like age, health, and job roles significantly impact the risk assessment. Older employees or those in physically demanding roles may lead to higher premiums.
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Cover length: Longer cover periods, such as until employees retire, increase premium costs as the insurer provides support for an extended time. Shorter durations are more affordable.
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Waiting periods: Opting for longer waiting periods can lower premium costs, but it also means employees wait longer to receive payouts. Shorter waiting periods are more expensive but provide financial support faster.
Some of these elements, such as your business type and employee demographics can’t be helped, however policy length and waiting periods can be tailored based on your budget to help keep premiums lower.
How to budget for Group Income Protection Insurance
Planning your budget is crucial for ensuring you have enough funds to cover your essential costs and employee benefits. When incorporating Group Income Protection Insurance into your budget, there are a few factors you need to consider.
First of all, assess the level of cover required for your business based on the size of your workforce, the risks associated with your business sector and your employees’ roles, and your budgetary constraints.
During the underwriting process, insurance companies will determine the risks of offering the cover. If your business operates in a more high-risk sector, or the employees within your company work dangerous roles, your monthly premiums are likely to be higher.
Once you’ve assessed the level of cover required for your workforce, it will be beneficial to get a more accurate estimation of your premiums, either direct through a product provider or through a financial adviser. Once you have a better idea of the costs, you can begin to allocate this within your overall employee benefits budget, balancing it against other benefits such as pensions or health insurance.
Another important consideration is the tax implications of Group Income Protection. When employer funded, GIP payments are usually treated as a deductible business expense (under current legislation and HMRC practice).
Tips for managing costs effectively
Managing the cost of Group Income Protection Insurance is essential to maintaining a sustainable employee benefits plan. Here are some strategies to help you keep premiums under control without sacrificing cover:
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Consider the scope of cover: Tailoring the coverage to fit the specific needs of your business and workforce can help control premiums. Offering a balanced level of coverage that meets employees' needs without over-insuring can make the policy more affordable.
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Adjust waiting periods or cover limits: By opting for longer waiting periods before benefits are paid or limiting the percentage of income replaced, businesses can lower their premiums. This can still provide protection for employees while making the policy more affordable.
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Regularly review and compare providers: Insurance costs and offerings can change, so it’s important to periodically review your policy. Comparing providers ensures that you’re getting the best value for money and may reveal opportunities to reduce premiums without compromising cover.
By applying these tips, businesses can effectively manage the costs of Group Income Protection Insurance while still providing suitable and valuable coverage for their employees.
How Wiltshire Friendly can help
Wiltshire Friendly is a specialist income protection provider for individuals, employers and sports players who are unable to work due to illness or injury.
Our Group Income Protection plans have been designed so that you are able to choose from a range of features and cost-related options to fit within your business and employee requirements.
To make a claim, apply for increased cover or discuss your requirements with us and discover how we can help you, please get in touch today.