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Group income protection is a policy taken out by an employer to cover a promise to provide sick pay to employees if illness or injury prevents them from working for a prolonged period.
Group income protection providers support employees to help them return to work with reasonable adjustments made by their employer but if the employee cannot work due to illness or injury the policy will pay a benefit of a proportion of their salary.
The benefit is paid to the employer and then passed on to the employee through the PAYE system. Generally, premiums paid by an employer can be offset against corporation tax and are not regarded as a benefit in kind.
The group risk market insures 2.46 million people for annual income protection benefits totalling over £86 billion – Swiss Re Group Watch 2019.
The group risk industry paid out £483 million in annual income protection benefits to a total of 15,244 people during 2018 – GRiD 2019 Claims Survey.
The average new claim paid in 2018 was £26,322 pa and the main causes for claim were cancer (24.5%) and mental illness (24.1%) – GRiD 2019 Claims Survey.
3,551 people (36.3% of all claims submitted) were helped back to work in 2018 before they reached the point of making a claim – GRiD 2019 Claims Survey.
On top of this, out of the 5,454 group income protection claims that went into payment during 2017, 2,044 people were helped by the insurer to make a full return to work during that year or during 2018 – GRiD 2019 Claims Survey.
A group income protection policy will often include some extra support services designed to help employers and employees alike on a daily basis – even if a claim is never made.
In total, there were 75,446 interactions during 2018 with the additional help and support services that are funded by group risk insurers, giving daily value to employers regardless of whether or not a claim was made under their policy – GRiD 2019 Claims Survey.
Expert advice should always be taken when setting up or reviewing a group risk insurance scheme to ensure that optimum cover is provided, any extra support services offered alongside the policy are used and all tax efficiencies are maximised.
Provides a benefit on an employee’s death
Represents 40% of all insured life cover in the UK
Tax free lump sum up to Lifetime Allowance
Taxable dependants’ pension
Benefits over Lifetime Allowance through “excepted” route
Pays a tax free lump sum to employee on diagnosis of one of a defined list of serious medical conditions or on undergoing one of a defined list of surgical procedures
Can be extended to dependants
Increasingly popular under flexible benefits arrangements
Fastest growing group risk benefit
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