Income protection has its origin in the 50s and 60s when Holloway Plans first offered its income protection policies to the general public. The policies and coverage have evolved through the years to further cater and provide more options for the general public.

Group income protection, also called permanent health insurance, is one of these policies under the income protection category. Group income protection insurance is a regular monthly benefit paid to an employee who is unable to work in the event of an accident or illness. Group income protection insurance provides employers a device to pay their employees a monthly income. Payment of the benefits generally starts 6 months after the deferred period and could last after the employee has fully recovered or until retirement; however, limited term schemes only pay until 2 to 5 years which includes rehabilitation in the event of an injury or illness.

Key Features of Group Income Protection

Generally, group income protection is like a safety net for employers to help cover for their employees. Features may vary from provider to provider, but there are certain features generic to all group income protection policies.

• A variety of options for deferred periods. A deferred period is a time a claimant has to wait before receiving the payment for the benefits. Employers are given the choice how long the deferred period will be after a claim. Payment could begin after 13, 26, 28, 41, 52, or 104 weeks. The trick there is the longer the deferred period is the lower premium you pay.
• Benefit payment terms option. This sets the length of time how long an employee can receive the payment for benefits: until the retirement age or up to 2 years. Here, the longer the payment would go, the higher the premium you have to pay.
• Lump sum options. Employees can choose to receive a monthly pay-out or lump sum. This would depend on the need of each member. A lump sum can be useful to finance an employee’s early retirement.
• Protection against inflation. Through the escalation option, income protection is protected from inflation. This guarantees that any benefit will increase over time at a fixed rate or in line with the Retails Prices Index (RPI) which could reach a maximum limit of 5%.
• Employee Assistance Program. Along with other additional benefits, the Employee Assistance Program or EAP has been added in most health insurance policies to help employees express and deal with their personal problems which could have adverse effects on their overall performance at work. This feature provides short-term counselling, assessment and support to employees.

What are the Benefits of Group Income Protection?

Group income protection insurance works both ways for the employers and their employees. When employees know that their employers care for their well-being, they become more productive at work. In turn, increased productivity means bigger profits for the employers. Below are more benefits the employer and the employee have from having group income protection.

Benefits for employers:

• Provides an excellent financial assistance at a modest cost
• Encourages good relationship between employer and employee
• Gives additional support and counselling without an extra cost
• Benefits from tax breaks in contribution
• Professional team helping in rehabilitation management
• Incorporates coverage of pension and employer’s NI contributions
• Once only underwriting

Benefits for employees:

• Guarantees financial aid
• Assistance and support during rehabilitation period
• Extra coverage for pension contribution
• Access to a variety of assistance for the employees and their families
• Continuous medical coverage until retirement with no additional medical proof

Factors Affecting Group Income Protection

There are additional benefits each policy has depending on the insurance company. However, there are different factors, both personal and organisational in nature that affects the cost of the policy.
On an organisational level, the factors that come into play are the length and level of cover, the deferred period, indexation, and an employer’s NI and pension contributions.

With regards to the level and length of the coverage – the longer the coverage, the higher the premium. The longest an employer can get for an employee is until retirement due to injury or sickness. Moreover, the level of coverage could range between 50% and 75% according to the employee’s salary. Indexation has also an effect because it protects a benefit against inflation. Having this in your group income protection keeps the value of the benefit in accordance with time.

On a personal level, your age, health, and occupation may greatly affect the cost of the premium. This means that the older you become, the higher the premium will be. Moreover, the nature of job you are in could also affect the cost of your premium. An occupation which is more exposed to risks and stress will definitely have a higher possibility of making a claim; thus, a higher premium.

An in depth look at group income protection makes us see the benefits it could give us if and when an unlikely situation happens. It also boosts your employees’ morale which could lead to higher efficiency.