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What is Group Income Protection Insurance?

A leave of absence because of an illness or injury can be a difficult and stressful 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, what the different types are and what industries will benefit from offering it.

What is Group Income Protection insurance?

Group income protection insurance is an insurance policy 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 don’t have to panic about money and employers don’t have to worry about 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.

What are the two different types of Group Income Protection insurance?

There are two different types of Group Income Protection insurance: ‘employer funded’ and ‘employee funded’. These options allow businesses to choose an insurance cover that fits their budget and requirements.

What is ‘employer funded’ Group Income Protection?

This is the 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.

In this type of plan, 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.

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 is ‘employee funded’ Group Income Protection?

This is exactly that - funded by employees themselves, rather than by the business. This is an ideal option for companies who want to offer Group Income Protection benefits to their employees, getting those employees access to group insurance premium rates, but are unable to afford it as a business themselves. 

The cover options are set by the employer and insurer and the employee then decides the level of cover they want.

The employee will receive the benefit directly and there will be no personal tax.

What does Group Income Protection cover?

This is dependent on the specific policy that is chosen - whether employee or employer funded - and covers illnesses and injuries that prevent employees working. All policies offer a basic level of coverage, including: 

  • 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 payout is between 65% and 75% of an employee’s income. 

  • The employer’s national insurance contributions for that employee - ‘employer funded’ only.

  • Long-term benefits such as pension contributions - ‘employer funded’ only.

In addition to financial benefits, some insurance plans offer additional features, such as:

  • Access to rehabilitation.

  • Wellness services.

  • Counselling services - offered either face face-to-face or over the phone.

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 policies, the cost of Group Income Protection policies depend on a range of factors:

  • Business type

  • Location

  • Number of employees

  • Type of work

The cost is determined by the plan term options that are chosen at outset, so can be set to meet a budget.

What industries should offer Group Income Protection insurance as a benefit?

It’s 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 sooner, 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.