Employer & director guide · Updated for 2026
What Is Group Income Protection Insurance?
Direct answer
Group Income Protection is an employee benefit provided by an employer that pays a proportion of an employee's income if they are unable to work due to illness or injury for an extended period. The employer usually pays the premiums, and benefits are typically paid to the employer first before reaching the employee, depending on how the scheme is structured.
How group income protection works
- The employer takes out a group policy covering eligible employees (sometimes including directors).
- If an employee cannot work due to illness or injury beyond the deferred period, the insurer pays a monthly benefit — often 50–75% of salary.
- Payments usually continue until the employee returns to work, reaches retirement age, or the policy term ends.
- Cover is medically underwritten at a group level; individual employees may face exclusions for pre-existing conditions.
- Helps attract and retain staff with meaningful sick-pay support beyond SSP
- Premiums may be treated as a business expense (subject to scheme structure and HMRC rules)
- Supports phased return-to-work and rehabilitation, reducing long-term absence costs
- Can cover directors as well as employees on PAYE
- Income support if long-term illness stops you working
- Often cheaper per person than buying individual cover alone
- May include access to employee assistance programmes or vocational rehabilitation
- Peace of mind beyond minimal Statutory Sick Pay (£116.75/week in 2024/25)
Typical deferred periods
The deferred period is how long an employee must be unable to work before benefits start. Employers usually align this with contractual sick pay.
| Deferred period | Typical use |
|---|---|
| 4 weeks | Rare for group schemes; higher premiums |
| 13 weeks | Common — aligns with employer sick pay ending |
| 26 weeks | Popular for cost control; suits employers with longer sick pay |
| 52 weeks | Lower premiums; employee needs other savings or sick pay first |
Employer-paid group income protection premiums are often treated as a business expense, but benefits paid to employees are usually subject to income tax and National Insurance when routed through the employer.
This differs from personal income protection, where you pay from taxed income and benefits are typically tax-free. Directors comparing group cover, executive IP, and personal policies should review both premium and claim taxation with an accountant.
Read our full guide: Is income protection tax deductible? →Group vs individual income protection
| Feature | Group IP | Individual IP |
|---|---|---|
| Who pays premiums | Employer (usually) | You personally |
| Underwriting | Group terms; may exclude pre-existing conditions | Full personal medical disclosure |
| Portability if you leave | Often lost or conversion offered | Stays with you |
| Benefit taxation | Often taxable as income via employer | Usually tax-free if paid personally |
| Best for | Employers, SMEs with staff | Self-employed, contractors, directors without group cover |
Yes — many insurers offer schemes from as few as three employees. For owner-managed businesses, group IP can cover staff while directors also consider director income protection or personal cover for income taken as dividends.
If you are a company director without a group scheme, compare self-employed income protection alongside setting up a group policy for your team.
Directors often assume a group scheme automatically covers them properly. In practice, dividend-heavy remuneration may be underinsured on group terms, and leaving the business usually means losing cover. We frequently pair a lean group scheme for staff with personal or executive cover for the owners.
— Protection adviser, Your Home Finance (FCA-regulated)
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General information only — not tax or legal advice. Scheme terms and tax treatment vary. Your Home Finance is authorised and regulated by the Financial Conduct Authority.