FAQS – Group Income Protection

Here are some of the questions we commonly receive in relation to Group Income Protection. However, so that we can provide you with the best help and advice please give our team a call on 0116 366 6866 or use the form to request a call back.

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What does Group Income Protection mean?

If an employee is unable to work on a long-term basis due to sickness or an accident, this type of policy will protect their earnings. Group Income Protection is a scheme taken out by an employer to allow their employees to receive up to 70% of their gross salary. If an employee is able to return to work on a part time basis (or in a lower paid role due to not being able to undertake their previous role), partial benefits can also be provided. An Income Protection policy often includes rehabilitation services and ways for employers to tackle absenteeism.

What are the different levels of cover for Group Income Protection?

The levels of cover can vary for Group Income Protection and, at the company’s discretion, will reflect different grades of employment and/or service.

What are the benefits of providing Group Income Protection for an employer?

By offering Income Protection company-wide, a business may benefit by providing rehabilitation and intervention at an early stage. By reducing the impact of costs due to absence, employers are able to provide an appropriate level of support to employees. Plus, having Income Protection as part of a benefits package will help to attract new employees.

What are the benefits of providing Group Income Protection as an SME?

For small to medium-sized businesses, the cost of absent employees may pose a greater risk to business operations due to the lower number of staff. By providing Group Income Protection as a benefit, this will help to reduce the impact. Plus, it can help a business to retain staff and to attract new employees.

What does Group Income Protection cost?

Usually, full group cover would cost between 1% to 1.5% of gross payroll. However, this also depends on the benefit level required and several other factors, such as how many employees will be covered on the policy, etc.

Are there any tax implications for Group Income Protection?

Group Income Protection schemes are not subject to insurance premium tax as they are usually classed as an allowed business expense by HMRC, which means schemes can be offset against corporation tax. However, Group Income Protection does not constitute a P11D benefit due to the fact the benefits are paid monthly through a company’s pay roll system – therefore, it is subject to income tax and national insurance.

What is the amount of cover available?

Usually, 75% of salary is the maximum amount of cover available – however, some insurers do have lower ceilings.

Are there any limitations for Group Income Protection?

The maximum insured benefit is 75% of gross earnings under a standard Income Protection scheme. Plus, per claim, there is a maximum amount payable as an annual benefit (maximum cover limit varies depending on the insurer). Any state benefits may also be taken into account.

Would I need to provide cover for all my employees?

You don’t have to provide cover for all your employees – however, the more employees you cover, the lower the cost of absence. Plus, this will improve your ability to have this policy as an allowable business expense.

What if I want to provide different levels of cover to different employees?

Yes, you could decide to have different levels of benefits for different employees. This could be based on job roles or the type of service they perform. However, the scheme should include all employees who fulfil the criteria.

What’s the process if an employee makes a claim?

In the first instance, the employer would need to submit the claim due to being the main ‘policy holder’. Once the claim has been accepted by the insurer, and after the deferred period, the benefit will start being paid to the employee.

Would Group Income Protection premiums increase or stay the same each year?

Usually, premiums are fixed for 2 or 3 years depending on the insurer (rate per £1,000 of benefit). If there are salary increases, then the cost will increase because the benefit is based on the employees’ salaries. Plus, if you add new members, the premium will increase and, subsequently, premiums would decrease if you lost any employees too.

If we want to add employees to the policy, what do we need to do?

Each insurer will have a different method of adding employees, but they can always be added to policies.

Would our employees need to submit any medical details/evidence?

This depends on whether your employees need to be medically underwritten. Usually, the insurer will ask them to take part in a telephone interview or use a declaration form to assess their medical history, and to check if they pose any risk. Sometimes, the insurer needs further evidence whilst medical underwriting is being finalised. However, employees would still usually be covered for a full benefit period (typically, 90 days), although any pre-existing medical conditions would not be covered in this instance.

Could I provide cover for employees based overseas?

Yes, as long as the contract of employment is with a registered UK-based company. Despite being overseas, many insurers will cover employees on the premises they are based at.

How many claims can be paid per employee under the policy?

As long as an employee has have not received a lump sum payment (where the option has been selected), then they can make more than one claim. The term ‘limited payment’ applies to incapacity from one injury or illness. Unless the claim is linked to a previous claim, and until a further deferred period has been completed, insurers will not make any further payments. However, if the incapacity is due to the same problem, then usually the period will be combined.

What if my employees are receiving state benefits alongside Group Income Protection?

This is not a problem – however, when calculating their total benefit amount, the insurer may take state benefits into account.

What about company directors; is this policy available for them too?

Yes, company directors can be covered by Group Income Protection at higher insured amounts/limits. Paid for by the business, this helps to cover both their salary and dividends.

What does the term ‘deferred period’ mean?

The length of time an employee must be absent from work due to illness before the insurer pays out the benefit is called a ‘deferred period’. The longer the deferred period is, the cheaper the premium will be.

What is the length of the deferred period?

Depending on the insurer, there are different deferred periods available – usually, these are 4, 8, 13, 26, 52 and 104 weeks. Please note that any number of weeks in this range could be specified.

How soon can we include new employees after we start our policy?

This could be daily, monthly or yearly, and depends on how the policy was set up to begin with. Please note that all new employees must meet the scheme’s eligibility criteria.

When will the Group Income Protection cover end?

The cover will cease when:-

  • The employee leaves your employment
  • If the employee no longer meets the eligibility criteria
  • The employee reaches the date of benefit termination
  • Early retirement or death of the employee

Are benefits payments protected from inflation?

Yes, it is possible to specify an increase in benefits by the rate of inflation or Retail Price Index or by a fixed % – this will depend on the policy and insurer.

What does the term used by insurers “actively at work” mean?

Once a policy scheme starts, all employees to be covered must not be off sick. If they are off work due to sickness, until they have returned to work, they will not be covered on the policy. However, there are some insurers do not insist on this.

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