Updated: March 06, 2020

How Does Group Income Protection Measure Up?

How does Group Income Protection compare with other insurance schemes? Read on to find out more

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Richard Angliss

Author: Richard Angliss - Finance Expert

Updated: March 06, 2020

If you have the option of joining a group income protection scheme you might want to know how it measures up to the alternative products you could consider instead.

Group vs. individual income protection

If your employer offers an income protection scheme as one of their company benefits, how does it measure up in costs and potential returns if you need to make a claim?

The table below pits group protection schemes head-to-head with individual income protection so you can see which option might be the right choice for you:

Income Protection Schemes
Group Scheme Individual Scheme
Owned & Paid for by Employer offers benefit free to employees or on a paid for basis Individual member owns the policy and pays the monthly premium
Cost Often cheaper than personal cover due to a larger group insured Can be more expensive than a group policy due to the additional assessments
Contributions Either the employer pays contributions or employees can contribute Paid for by the individual from taxed income
Benefits Paid to the employer and passed on to the employee. If employee did not contribute to premiums benefit will be taxable as earned income Benefits are normally paid tax free. Potential to choose features to suit their needs, eg. payment start dates and duration for benefits to be paid
Cover Will usually cease if you leave employment Will continue unchanged, even if you change employer
Health Questionnaire Not normally required due to the nature of group policies Required. Any pre-existing conditions might be excluded
Medical History Not usually an issue, providing you’re fit to work when you apply for cover Previous poor health may influence the price of cover

If you’d like to talk to an independent financial advisor about your options and get advice tailored specifically to your circumstances, get in touch for a chat and we’ll introduce you to one of the experts we work with.

Income protection vs. critical illness

While critical illness cover will provide a one-off lump sum payment in the event that you’re diagnosed as critically ill, income protection provides a regular stream of income in the event that you are unable to work due to long-term ill health.

Both insurance products give you protection in the event of long-term ill health. They also each offer you the freedom to spend the proceeds of a claim however you want or need to sustain yourself and your family during a difficult period.

So how do they compare and which one is right for you?

The table below illustrates some of the key differences between the two protection policies:

Group Income Protection Critical Illness Cover
Cover Provided A portion of your current salary A lump sum to use on treatments, pay off a mortgage or provide for your family
How a Claim is Paid Monthly, usually for a limited period, depending on the kind of cover you have. Provides income until you recover or have found another way to earn your living One-off lump sum payment
Disability Payment Will pay for disability as long as it prevents you from being able to work Disability must be total and permanent, with no chance of recovery
Amount of Payment Up to a defined percentage of your gross monthly income, subject to specific policy limits. Usually set at between 65% and 80% of your income Pays the full amount of whatever sum you insured when taking out the policy
Illness Types Covered Policy will pay out in the event of any illness or injury which prevents you from being able to work Policies have a list of critical illnesses covered. Any illness not on the list will not be considered payable
Policy Termination As long as the policy is maintained, you can make multiple claims for different conditions Once a lump sum payment has been paid, the policy ends
Joint Policies Available? Taken as a standalone policy Can be taken as an option with various other protection products

If you’re weighing up whether you’d be better protected with an income protection product or critical illness cover, speak to one of the experts we work with. They will assess your circumstances and make personalised recommendations based on your financial situation and specific requirements.

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Group income protection vs. permanent health insurance

Group income protection is often thought of as very similar to permanent health insurance (now more commonly referred to as income protection) yet, while the two insurance products might appear almost identical, the way the two policies are underwritten and priced can vary greatly.

The table below positions the two products side-by-side to provide an easy way to help you decide your preferred type of cover:

Group Income Protection Income Protection
What is covered? Loss of income due to injury or sickness Loss of income due to injury or sickness
When will it pay out? Most policies come with a deferred period, but you can get cover which will pay out on day one of an illness or injury Most policies come with a deferred period, but you can get cover which will pay out on day one of an illness or injury
How is benefit paid? Monthly Monthly
How much benefit can I get? Depending on the policy and provider, usually between 50% and 70% of your gross income Depending on the policy and provider, usually between 60% and 75% of your gross income
How long is benefit paid? Until you’re well enough to return to work or reach the selected retirement age Until you’re well enough to return to work or reach the selected retirement age (many people go for products with a shorter payment period of 1 or 2 years per claim due to the expense involved)
Additional Useful Info Covers income if you’re unable to work and earn a living due to illness or injury. Since you’re insuring a percentage of your salary, you’ll need to let your provider know if your income changes to avoid being over or under insured. Mostly underwritten based on occupation so people who work in jobs considered to be higher risk tend to pay far higher premiums or cannot get cover at all

Speak to an expert

If you want to make sure you can meet the needs of yourself and your family in the event of illness and aren’t sure how best to protect yourself, get in touch for a free, no-obligation chat and we’ll match you with one of the financial advisors we work with.

All the advisors we work with are experts in their field, we’ll connect you to someone experienced in helping customers protect their financial situation in the face of unavoidable adversity.

As independent advisors, not only will they be able to advise you of the most appropriate product for your circumstances, they’ll also be able to use their whole-of-market access to ensure you get the right cover for the best available price.

There’s no obligation to proceed and all the experts we work with are independent financial advisors qualified to give advice and regulated by the Financial Conduct Authority.
Call 0808 189 0463 or make an online enquiry to get started.

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We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in group income insurance. Ask us a question and we'll get the best expert to help.

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Richard Angliss

Richard Angliss

Finance Expert

About the author

Richard Angliss has made a career in financial services which stretches over 40 years.

His early career was spent learning about the various financial products and applying them to prudent advice, working for one of the largest life assurance and investment firms. After that he joined the financial services arm of a very well-known firm providing independent advice to their 8 million customers.

For the last 20 years he has been involved in building software solutions that help Advisers and clients work together to achieve good financial outcomes and helping to set up three independent advisory firms. He also has written many articles for financial services publications and provided commentary for newspaper journalists.

At an early stage in his career he realised the great satisfaction that comes with being able to help people achieve their goals and protect their families. “Regulation of financial services has hugely impacted on ensuring people get appropriate advice. The issue these days is access to that advice and just as importantly regular reviews to make sure that everything stays on track”.

With the growing development of online resources such as Online Money Advisor he sees a great future for people to access advice to make their pension and investment work harder for them.  Plus, of course, to ensure they have insurance products in place that will be required when unforeseen events happen.

He knows getting that balance right is crucial to prudent financial planning and the wellbeing of individuals and their families.

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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