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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 2.775 million people for annual income protection benefits totalling over £100 billion – Swiss Re Group Watch 2021.
The group risk industry paid out £551 million in income protection benefits to a total of 15,837 people during 2020 – GRiD 2021 Claims Survey.
The average new claim paid in 2020 was £28,138 pa and the main causes for claim were cancer (28%) and mental illness (22%) – GRiD 2021 Claims Survey.
2,362 people (31.8% of all claims submitted) were helped back to work in 2020 before they reached the point of making a claim – GRiD 2021 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 138,222 interactions during 2020 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 2021 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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