An absence from work because of an illness or injury can be a difficult experience, for both the employee and the employer. Employees don’t want to be worried about money and potentially returning to work earlier than they should, and employers often can’t afford to be paying a wage to someone who isn’t completing the work. But how do you combat this? Enter: Group Income Protection plans.
In this article, we are going to explore what Group Income Protection insurance is, how it works and who it applies to. We will hopefully answer some of your questions about Group Income Protection schemes so that you are fully prepared to make a well informed decision about whether offering your employees a Group Income Protection scheme is right for you.
In this article, we are going to explore what Group Income Protection insurance is, how it works and who it applies to. We will hopefully answer some of your questions about Group Income Protection schemes so that you are fully prepared to make a well informed decision about whether offering your employees a Group Income Protection scheme is right for you.
What is Group Income Protection insurance?
Group income protection insurance is an insurance plan that will regularly pay employees a percentage of their salary if they are unable to work due to illness or injury. These payments can continue until the insured employee is fit enough to return to work, either for a fixed term or until the employee retires if they don’t recover and return to work. These are plan options to be agreed when taking out the insurance.
Group Income Protection is designed to help both employers and employees in the event of medium and long-term sick leave. Employees then don’t have to panic about money and employers don’t have to worry about potentially paying all of a salary for work that isn’t being done. Again, what % of salary to be insured is agreed when taking out the insurance.
How does Group Income Protection insurance work?
As we have already discussed, Group Income Protection schemes provide financial support to employees of a business who are unable to work due to illness or injury. After a specified waiting (or deferred) period, the plan pays an agreed percentage of the employee's salary for a predetermined time period.
In addition to income replacement, some insurance provider schemes offer support services, such as rehabilitation programs to help employees return to work sooner. For employers, offering income protection can help reduce the financial burden of covering long-term sick leave, while also demonstrating commitment to employee wellbeing. It enhances the overall benefits package, making the company more attractive to prospective employees and improving staff retention.
This is therefore a financial choice and responsibility of the business, meaning that the employer is accountable for paying the insurance premiums. However, normally, Group Income Protection premiums are a deductible business expense (which should be confirmed with your accountants).
The income replacement benefit is claimed by and paid to the employer, before being passed onto the employee through normal payroll. Employers are able to choose the level of protection they want to provide to their employees and also decide how quickly the cover commences and the payment periods. The level of cover is also dependent on your employees’ earnings.
The maximum amount that you can insure for each employee is normally 75% of their total earnings. A claim can start from as soon as 4 weeks and be paid for as short as 6 months or right through to retirement. A claim stops when the employee returns to work.
The employer can also decide to insure additional costs such as employer pension and National Insurance.
This is an attractive benefit to both employers and employees. Not only does it show your team that you care about their wellbeing, but it can also help your business meet financial and legal obligations, such as Statutory Sick Pay.
What does Group Income Protection cover?
It covers illnesses and injuries that prevent employees working.
Plans offer a level of cover, being a percentage of the employee’s salary paid until they return to work, they retire, or for a specific amount of time - starting at 6 months. The typical maximum income protection benefit is 75% of an employee’s income.
The employer can also decide to insure additional costs such as employer pension and National Insurance.
Group Income Protection not only provides financial security, but can also offer valuable support services to help employees return to work as quickly as possible. In addition to financial benefits, some insurance plans offer additional features, such as:
Whilst covered by the plan, employers and employees can claim as many times as they need to. However, the cover will not pay out if the employee is made redundant.
How much does Group Income Protection insurance cost?
Just like with individual income protection plans, the cost of Group Income Protection insurance depend on a range of factors:
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Business type
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Location
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Number of employees
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Type of work
The cost is then also determined by the plan term options that are chosen at outset, such as insured salary %, how quickly the benefit starts to be paid and for how long so can be set to meet a budget.
Understanding the income protection deferred period is important, as choosing a shorter deferred period (such as 4 or 8 weeks) will make cover more expensive, but ensures benefits start sooner if an employee is unable to work.
What industries should offer Group Income Protection insurance as a benefit?
It would be a misconception that only businesses within industries that are considered ‘dangerous’ should take out Group Income Protection insurance. All businesses could benefit from offering Group Income Protection insurance.
There are a number of reasons why offering this to your employees would be beneficial to your business. For example, it shows that you care for your employees, meaning that they are more likely to feel appreciated and less likely to leave. As well as this, income protection plans can help sick and injured workers return to work, and can help you maintain a stronger, healthier workplace culture that will enhance your productivity.
How Wiltshire Friendly can help
Wiltshire Friendly is a specialist income protection provider. We provide income replacement cover to 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.