Employee Benefits – Group Risk Insurance


Alongside the more traditional workplace benefits, such as pensions, annual leave and sick pay, employers are increasingly opting to extend their packages as a means to attracting and retaining key staff.

In some cases, the cost of these benefits is carried by the employer themselves. However, there are certain categories where businesses can choose to transfer some – or all – of the risk associated with employee benefits to a third party. This is known as Group Risk Insurance.

What is it?

Provided in isolation or as part of wider benefits package, these employer-sponsored products can provide employees with access to a range of insured protection covers; these are usually offered at either a reduced rate or completely free of charge, as they are covered under one group policy.

As the policyholder, premiums are paid by the employers and any claims made are done so by the employer in respect of their employees. As with Private Medical Insurance, premiums paid by the employer can usually be offset against corporation tax.

Types of Group Risk Insurance

1. Group Life Assurance
As the most popular protection benefit in the UK, this provides a benefit should an employee die in service. It is usually paid as either a lump sum to the employee’s nominated beneficiaries or as a taxable pension to their financial dependants, or both. It is also possible for lump sum settlements to be paid tax free up to the Lifetime Allowance.

2. Group Income Protection
Also referred to as Permanent Health Insurance, this benefit enables an employer to be able to pay long-term sick pay to an employee should an illness or injury prevent them from being able to work for an extended period of time. It can also make up the shortfall of lost income should an employee have to take a lower paid or part-time position as a result of these illnesses or injuries. Any claims made are paid to the employer and passed onto the employee through PAYE. It is used by many employers as an integral part of their absence management programme.

By offering a level of income support, Group Income Protection policies provide a financial incentive that encourages employees to return to work, as it helps guarantee a reasonable standard of living which they wouldn’t necessarily be able to do when either not working or working reduced hours at another firm. Many insurers also offer additional support services, such as counselling or physiotherapy, to aid with the employee’s recovery. In some cases, claims are not actually needed, as the intervention from the insurer – alongside support from the employer – has enabled the employee to successfully return to work.

3. Group Critical Illness
In contrast to Private Medical Insurance, which offers employees access to treatment for curable, short-term illnesses/conditions and accidents, critical illness comes into effect when an employee is diagnosed with one of a defined list of serious medical conditions or has to undergo one of a defined list of surgical procedures. The policy usually provides a tax-free lump sum payable to the employee.

This benefit often forms part of a voluntary or flexible benefits package (around two thirds of employees on a critical illness group policy are so as part of a voluntary or flexible scheme). As such, with no medical underwriting taking place, cover generally operates under a pre-existing condition exclusion.

Due to the levels of financial protection offered to both employees and their families, these types of benefit are becoming increasingly popular. In comparison to other components of a typical workplace benefits package, they are also relatively inexpensive for employers to implement. Typically, a combined package of employer-sponsored life, income and critical illness cover will cost between 1% and 2% of total payroll.

At Finura we can help you to set up or change a group risk insurance scheme in the most tax-efficient way possible and ensure that any level of cover is fit for purpose. Where possible, Finura only uses insurance services that have been awarded a 5-star Defaqto rating.

Articles on this website are offered only for general informational and educational purposes. They are not offered as, and do not constitute, financial advice. You should not act or rely on any information contained in this website without first seeking advice from a professional.


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