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Group income protection insurance, for UK employers
Group income protection insurance is cover an employer takes out so that staff keep an income if long-term sickness or injury stops them working.
This guide covers how it works, the deferred period, how HMRC taxes it and how it differs from income protection you buy for yourself.
Every claim here is our summary of a named external source, linked beside it. Sources change: check the wording at the link before you rely on it.
Source: GRiD (GRiD ↗)
What group income protection is
Legal & General describes its group income protection as designed to give employees a regular income if they cannot work because of long-term sickness or injury (Legal & General ↗).
Aviva's policy provides a percentage of salary, up to 80% for employees or 50% for equity partners (Aviva ↗).
Canada Life offers cover up to 75% of salary, for two or more employees (Canada Life ↗).
The employer sets the scheme up; Aviva says all eligibility rules have to be agreed with the provider (Aviva ↗).
HMRC's manual describes the flow: money goes from the insurer to the employer, who pays it to the employee as sick pay, though the insurer may instead pay the employee directly (HMRC ↗).
Set up
The employer insures its staff
It agrees eligibility with the insurer and pays the premiums.
Absence
An employee cannot work
Through long-term sickness or injury. The deferred period starts.
Benefit
The insurer pays
To the employer, who pays it on as sick pay, or to the employee directly. Either way it is taxed as earnings.
Return
Support back to work
Legal & General and Aviva both describe rehabilitation support in their policies.
Steps summarised from HMRC (HMRC ↗), Legal & General (Legal & General ↗) and Aviva (Aviva ↗).
How group income protection is taxed
On the premium, Aviva says that under current UK tax law premiums for group income protection usually qualify as an allowable business expense (Aviva ↗).
For the employee, HMRC says that where sick pay is provided under arrangements with an insurance company, the right to receive it is not a benefit chargeable under the benefits code (HMRC ↗).
On the benefit, HMRC says sick pay the employer funds, directly or through an insurance policy, is taxable as earnings (HMRC ↗).
Aviva says benefits paid to an employee through an employer are paid via PAYE (Aviva ↗).
Sick pay from a fund made up entirely of employees' own contributions is not taxable as employment income (HMRC ↗).
Tax depends on how your scheme is set up.
Check it with your accountant before you rely on it.
Where both pay in, HMRC says only the part of the sick pay attributable to the employer's contributions is charged (HMRC ↗).
Deferred periods, lined up with sick pay
The deferred period is the gap between an employee going off work and the benefit starting.
Aviva says you choose when payments begin, from 8 to 52 weeks, so it can align with your company's sick pay arrangements (Aviva ↗).
Legal & General publishes 13, 26, 28, 39, 52 or 104 weeks (Legal & General ↗).
For comparison, Statutory Sick Pay is paid by the employer for up to 28 weeks (GOV.UK ↗).
Move the line to the week your own company sick pay stops, and see the first published option at or after it.
- Legal & General group income protectionFirst option: 26 weeks
Its published options: 13, 26, 28, 39, 52 or 104 weeks of incapacity.
- Aviva group income protectionFirst option: 26 weeks (its range is 8 to 52)
Aviva says you choose when payments begin, from 8 to 52 weeks.
- Individual income protection (MoneyHelper)First option: 26 weeks
MoneyHelper says the most common waiting periods are 4, 13, 26 weeks and a year.
Published deferred periods, placed on one scale.
The lit option is simply the first one that starts at or after your figure; it is not a recommendation, and a quote may offer other terms.
Check each at its source: Legal & General ↗ · Aviva ↗ · MoneyHelper ↗.
How group IP differs from individual IP
Individual income protection is a policy you buy for yourself.
MoneyHelper describes it as long-term insurance that gives you a regular income until you retire or can return to work, typically paying between 50% and 65% of your income (MoneyHelper ↗).
Where no premium was tax-deductible, the law says no income tax arises on the payments, if the policy's conditions are met (legislation.gov.uk ↗).
A company can also insure one director or employee.
Legal & General's Executive Income Protection pays the business, which uses it to fund that person's sick pay (Legal & General ↗).
Rows summarise HMRC, the legislation, MoneyHelper and the insurers' own descriptions; check each at its link.
Cost factors for group income protection
We do not publish prices, and none of the insurer pages we checked publishes a group rate.
What the insurers do publish are the choices a scheme is built from, and the premium is priced on those choices.
For an individual policy, MoneyHelper lists what affects the cost, including age, occupation, the percentage of income covered and the waiting period, and says the longer you wait, the lower the monthly premiums (MoneyHelper ↗).
- Benefit level
How much salary
Aviva: up to 80% for employees (Aviva ↗). Legal & General: no more than £350,000 a year per employee (Legal & General ↗).
- Deferred period
When it starts
Aviva: 8 to 52 weeks (Aviva ↗). Legal & General: 13 to 104 weeks (Legal & General ↗).
- Payment term
How long it pays
Aviva: to State Pension Age, or a limited term of 2 to 5 years (Aviva ↗). Legal & General: to the termination age, or 2, 3 or 5 years (Legal & General ↗).
- Scheme size
Who is covered
Legal & General: from 3 employees on its standard policies (Legal & General ↗). Canada Life: two or more (Canada Life ↗).
What group policies paid out
GRiD, the industry body for group risk, reports that group income protection policies paid £670.7m in 2025, and that there were 7,920 new claims that year (GRiD ↗).
Its headline for 2025: 68% of employees who were newly absent returned to work under group income protection benefits (GRiD ↗).
These are industry totals, not a measure of any one insurer or scheme.
Check it for yourself
Every claim on this page is our summary of one of the documents listed here.
We last checked them against the live sources on 28 September 2026.
The documents are the authority, not this page.
Insurers and HMRC update them, so validate any figure or condition at its link before you rely on it.
- HMRC Employment Income Manual, EIM06410 ↗Sick pay funded by the employer, including through insurance
- HMRC Employment Income Manual, EIM06420 ↗Sick pay funded by employees’ own contributions
- HMRC Employment Income Manual, EIM21820 ↗The right to insured sick pay is not a chargeable benefit
- ITTOIA 2005, section 735 ↗When health insurance payments are free of income tax
- GOV.UK: Statutory Sick Pay ↗How long an employer pays SSP
- MoneyHelper: what is income protection insurance? ↗What it pays, waiting periods and what affects the cost
- Aviva group income protection ↗Benefit levels, deferred periods, payment terms, tax
- Aviva: how does group income protection work? ↗Eligibility, deferred period, benefits paid via PAYE
- Legal & General group income protection ↗Deferred periods, payment terms, scheme size
- Canada Life group income protection ↗Cover level and scheme size
- GRiD: group risk claims in 2025 ↗Group income protection, life and critical illness claims paid
- Legal & General: death in service ↗A tax-free cash sum if an employee passes away on the payroll
- Legal & General Executive Income Protection ↗Pays the business, to fund one employee’s sick pay
Group income protection, answered
Not financial advice. This page is general information. Before buying insurance, the FCA tells consumers to check the firm on its Firm Checker (FCA ↗). For free guidance, see MoneyHelper.