Group Income Protection: How It Works and What It Covers

Most businesses insure their premises, their stock and their key equipment — but not the thing that actually generates the money: their people’s ability to work. Group income protection fixes that. It’s a benefit that quietly does two jobs at once: it looks after an employee who’s too ill to work, and it takes the financial and practical strain of long-term absence off the employer.

What is group income protection?

Group income protection (GIP) is an employer-arranged policy that pays a regular, ongoing income to an employee who can’t work for a long period because of illness or injury. Instead of a lump sum, it replaces part of their salary — paid through your payroll — so they keep money coming in while they recover.

How much does it pay — and for how long?

• How much: typically 50%–75% of salary, and some schemes include employer pension contributions and National Insurance cover on top.
• When it starts: after a deferred period you choose — commonly 13, 26 or 52 weeks — which is how long an employee is off before the benefit kicks in. A longer deferred period lowers the premium.
• For how long: either a limited term (for example 2 or 5 years per claim) or all the way through to retirement, depending on the policy.

The rehabilitation benefit employers overlook

The part that genuinely surprises employers is the rehabilitation and return-to-work support most GIP policies include from day one. Insurers provide early intervention, case management and practical help to get people back to work sooner — which reduces the length of absence, the cost of covering it, and the risk of losing a good employee altogether. For many businesses this is worth more than the income benefit itself.

What does it cost?

Cost depends on your team’s ages, salaries, occupations, the percentage of salary covered, the deferred period and the payment term. Because it’s priced across the whole group, the cost per employee is usually modest — and choosing a longer deferred period or a limited payment term keeps it affordable.

How is it taxed?

For most employers the premiums are an allowable business expense, and group income protection isn’t usually treated as a taxable benefit in kind for employees. When a claim is paid, the employee receives it through payroll and is taxed as normal income — which is exactly how their salary would have been taxed. An adviser will confirm the treatment for your scheme.

Group income protection doesn’t just pay a salary — it pays for the help that gets someone back on their feet.

Setting it up

ComparePMI compares group income protection across multiple insurers. If you decide to go ahead, we introduce you to an FCA-authorised firm who advises on and builds the right scheme for your team. It’s free and there’s no obligation. See business & group schemes or ask for a comparison.