Protection insurance explained Protection insurance from your employer

Employer sitting at desk

Getting income protection and life insurance through your employer can be cheaper for you and boost your employer's staff retention

Many of us might be put off buying protection insurance like income protection and life insurance by their cost and perceived complexity. However, you may find that your employer already offers you cover, often for free or at a cheaper rate than you'd pay if buying direct.

What protection cover might my employer offer?

Group income protection

Income protection pays out a proportion of your salary if you're unable to work due to illness or accident. While you can buy income protection cover yourself, it's usually cheaper through your employer and is likely to offer cover even if you have pre-existing medical conditions. 

Under a group IP policy, the insurance company pays your employer if you're unable to work. Your employer then pays you either your full salary or a pre-agreed proportion of it. Unlike individual income protection, though, group IP is taxable.

Statutory sick pay

If you're sick and unable to go to work, your employer will usually give you sick pay. The standard weekly rate for SSP is £88.45 a week and it's usually paid for up to 28 weeks. For more detail, read our guide to statutory sick pay.

Life insurance

It's worth checking your employment contract and your pension documentation - many employers offer death-in-service life insurance cover, providing a lump sum or income for your dependants if you die.

Critical illness cover (CIC)

CIC pays a tax-free lump sum to an employee on diagnosis of one of a defined list of serious medical conditions or on undergoing one of a defined list of surgical procedures. The average claim paid in 2014 was £67,000, according to the Association of British Insurers.

Spouse's pension and lump sum 

If you're a member of your company's pension scheme, check what lump sum or survivor's pension your partner would be entitled to if you die. Defined-benefit pensions in particular, also known as final salary pensions, will usually include a provision for a spouse's pension when you die.

Private medical insurance (PMI)

Many employers pay for PMI for their employees, allowing you to access private healthcare if you fall ill. It's worth remembering though that even if your employer pays for the PMI cover, it will be usually be treated as a benefit in kind on your form P11D, so you'll have to pay the income tax on the benefit. Even if you don't put in a claim, you'll still have to pay the tax.

When should I mention protection insurance to my employer?

It can be difficult to ask your employer about the protection insurance benefits it offers. Just raising the issue could suggest that you're planning to claim on whatever cover your employer offers.

Income protection provider Unum suggests occasions when you could talk to your employer about cover:

  • When you start a new job. When negotiating your contract, it's worth asking if key cover such as income protection is, or can be, included in your benefits.
  • At your annual appraisal. Pay rises can be a tricky topic, especially in difficult economic circumstances. If your employer is unwilling to award you a big jump in salary, it may instead see the attraction of a good benefits package as a cost-effective way to encourage staff retention and get you back to work as soon as possible if you fall ill.
  • Big life changes. Having a baby, getting married or buying a new home can offer a natural opportunity to ask about protection insurance.
  • If you've been off ill. If you have a back-to-work interview with your boss or HR department, it's worth asking what the company policy is on long term illness and if they offer income protection cover.
  • On your next employee survey: If you're asked for feedback, think about mentioning protection insurance like income protection. Employee surveys are often anonymous and can help put issues on an employer's agenda.
  • Before your flex benefits review. If your company offers flexible benefits, you may be able to get protection insurance at no extra cost to the business. 

Looking to buy life insurance?

If you decide you need advice, make sure you consult an independent life insurance broker.

Which? Financial Services can refer you to an impartial, no-obligation third-party advice service to provide you with the best life insurance or mortgage insurance policy tailored to your individual needs. 

Find out more about the life insurance referral service at Which? Financial Services.

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