Group Income Protection (GIP)
AKA: Group Income Replacement(GIR/IR), Permanent Health Insurance (PHI)
Financial security for employees unable to work due to illness or injury.
0.25-2% of benefit
Premium calc’d as a % of insured benefit
What is Group Income Protection?
Insures a percentage of a members’ salary as long term sick pay in the event that an employee be unable to work due to illness or injury.
Benefit payment term available to either members retirement or as a fixed term, e.g. 2 or 5 years.
Provides proactive rehabilitation and support services to help employee’s return to work and to support employers throughout claim events.
Paid to the company and then passed to the employee through PAYE.
Typically also includes an Employee Assistance Plan (EAP), which offers advice and counselling to staff.
Main claim causes are cancer (~24%) and mental illness (~24%).
Why Group Income Protection for your employees?
Provision of a highly valued employee benefit.
Recruitment and retention benefits.
Rehabilitation services reduce long term absences.
Group cover is typically cheaper than individual cover.
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Policy terms that you can choose
Percentage of salary The percentage of an employee’s salary that’s paid in benefit, typically 33.3%-75%.
Definition of salary The salary definition which the benefit is calculated from. Typically basic annual salary or P60 earnings.
Benefit term/payment term Traditional policies typically provide cover until a member’s retirement date, however short ‘term policies’ of only 2 or 5 year benefit payment terms are available.
Deferred period Period of sustained sickness absence required before claim payment commences. Typically 26 weeks.
Escalation rate Annual rate by which benefit escalates in order to cope with inflation.
Deduction Benefit payments can be chosen to have state benefit deductions removed from them.
Definition of disability e.g. ‘Own occuption’ - member unable to perform own occupation, ‘Any Suited Occuption’ - member unable to perform any suited occupation.
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Tax treatment
Typical tax treatment of these insurances, subject to your tax advisors and tax controller.
For employers
Corporation tax
Group Income Protection premiums do qualify for corporation tax relief as a business expense.
Insurance premium tax
Group Income Protection premiums are exempt from IPT.
For employees
P11d tax
Group Income Protection is not subject to P11d benefit in kind tax.
Income tax and NI
Group Income Protection benefit is paid as salary through PAYE and as such is subject to Income tax and National Insurance.
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