According to a 2026 survey by the CIPD, 77% of UK employers link the benefits they provide to specific objectives such as employee retention or engagement. Workplace benefits like life insurance and income protection can play an important role, helping show your employees that their well-being and financial security are valued.
Group income protection insurance is one type of policy employers may offer as part of a wider business protection or employee benefits. It’s designed to provide financial support to employees when they are unable to work due to illness or injury.
In this guide, we’ll look more closely at how group income protection works, how it differs from an individual income protection policy, and what it typically covers.
How does group income protection work?
Group income protection policies are arranged and paid for by the employer on behalf of their employees.
If one of your employees becomes unable to work due to illness or injury, the policy may begin paying a regular benefit after the deferred period. This period is usually aligned with the employer’s sick pay policy and can range from a few weeks to several months.
Once the deferred period ends, the policy can pay a proportion of your employee’s salary (typically 50–75%). Payments may continue until the employee returns to work, reaches the end of the policy term, or reaches retirement age, depending on the policy conditions.
Some insurers also offer additional support services, such as rehabilitation programmes or occupational health support, to help your employees return to work.
Why do employers offer group income protection?
Many employers choose to offer group income protection as part of a wider employee benefits strategy.
Providing financial protection for employees during long-term illness may help your business:
Support employee wellbeing
Reduce the financial stress associated with long-term sickness
Encourage a faster return to work through rehabilitation support
Improve staff retention and workplace morale
Who is eligible for group income protection?
This all depends on how you choose to structure the scheme.
In some organisations, the policy covers all employees, while in others it may apply only to certain groups, such as full-time staff or senior roles. You may also choose to introduce criteria for eligibility based on factors such as minimum working hours or length of employment.
Because the cover is arranged by the employer, employees usually do not need to undergo separate medical underwriting unless the benefit exceeds a certain level.
What does group income insurance cover?
Group income protection covers a wide range of long-term illnesses and injuries that can prevent people from carrying out their job.
Policies commonly cover conditions such as:
Serious injuries
Long-term illnesses
Mental health conditions such as stress, anxiety, or depression
Musculoskeletal conditions such as back problems
Certain chronic health conditions that affect the ability to work
The benefit is usually paid to you, the employer, who can then pass the payment on to the employee through payroll.
What income protection doesn’t cover
Like most insurance policies, group income protection has exclusions.
While the exact terms depend on the insurer, policies typically do not cover:
Short-term illnesses that fall within the deferred period
Self-inflicted injuries
Certain pre-existing medical conditions
Claims resulting from criminal activity or substance misuse
As the employer, you should review the policy details carefully to understand what is and isn’t included. In doing so, you can ensure the policy still aligns with the needs of your workforce and that the terms are clearly communicated to the employees.
Group vs individual income protection
Group income protection differs from individual income protection in several key ways.
Individual income protection policies are arranged and owned by the person being insured. They choose the level of cover, pay the premiums themselves, and keep the policy even if they change jobs.
Group policies, on the other hand, are owned by the employer, provided as a workplace benefit. Your employees will be covered while they work for the company, but the cover usually ends if they leave their job.
Another difference to mention is cost. Group policies cover multiple employees under one scheme. Because of this they can be often more cost-effective for employers than individuals purchasing their own policies separately.
What are the pros and cons of group income protection?
Like all policies, group income protection has its strengths, as well as limitations:
Pros
Supports employee financial security if they are unable to work due to illness or injury.
Strengthens employee benefits packages and can help attract and retain both current and potential staff.
Can help improve employee loyalty and reduce staff turnover.
Demonstrates that you care about your employees’ well-being and long-term financial security.
Cons
Cover is tied to employment, so if an employee leaves the company the cover will usually end.
Employees typically cannot customise the policy or choose their level of cover.
It may not replace a full salary, as most policies only cover a percentage of income.
How much does group income protection cost?
The premiums for group income protection won’t be the same for every company. Instead, the cost depends on several factors, including:
The size of the workforce
The average age of employees
The level of cover provided
The length of the deferred period
The type of work employees carry out
Naturally, if you have a large number of employees, the overall cost will usually be higher than it would be for a smaller business. Because of this, some companies introduce eligibility criteria. For example, cover may only be offered to full-time employees rather than part-time or freelance workers.
As an employer, you're typically responsible for paying premiums, although some businesses may choose to share the cost with employees. As it’s arranged on a group basis, it is often more affordable per person than arranging separate income protection policies.
Other group protection policies
You may also choose to offer additional policies to your employees, such as:
Group life insurance (also known as 'death in service')
However, the more protection you offer, the more it will cost overall.
The insurance products offered by Cavendish Online have no cash-in value at any time. If you stop paying your premiums, your cover will stop, your policy will end, and you will receive no benefit. If you have not claimed before the end of your chosen policy term, the policy will end, and no benefit will be paid.
Speak to a business protection expert
At Cavendish Online, our team of protection specialists can help you arrange the most suitable policies for your business. As a whole-of-market broker, we compare a wide range of providers to help you find the right level of cover at a competitive premium.
We provide advice across a full range of business protection products, including policies designed to support employees and protect the financial stability of your organisation.
You may benefit from speaking to one of our advisers if your business operates as a:
Limited Company
Partnership
Limited Liability Partnership (LLP)
Sole Trader or self-employed business
Our team can guide you through the quotation process, explain the available options, and help you structure a policy that suits the needs of your business and employees.
If you would like to learn more about arranging group income protection or other business protection policies, please call:
01392 436 193
(Monday – Thursday: 9am – 5:30pm, Friday: 9am – 5pm)
