I have an SME corporate client who is hugely keen on purchasing group income protection, but they are finding it hard to see it as anything more than extra cost. How can I advise on this and what product types should I suggest?
Clare Dare, group risk and flexible benefits director, Broadstone
The first question to ask this client is why are they so keen on buying this policy? Have they had long-term absentee issues, is it seen as a talent attraction/staff retention tool? Have they thought about who they will offer it to and how the scheme will look?
The great thing about income protection is that it can be designed to fit the client’s needs. You can create a scheme made up of both employer and employee paid elements or through a purely voluntary contract, which employees pay for themselves.
Clients can limit their liability by covering a smaller percentage of salary, or reducing payment of the claim from SPA to say two, three or five years. Additionally they can set long waiting periods before claims will be paid.
The benefit of an IP policy to both the employer and the employee are manifold. There are early intervention services and increased support offered by the insurers to maintain a healthy workforce, limit absenteeism and ensure that prospective claims are dealt with promptly to manage employees back to work before the end of the deferment period.
Insurers are also offering additional add-on options such as an employee assistance programme, and subsidised gym memberships, for example, which benefit everyone.
Schemes can also be designed to cover costs that the company remains liable for when an employee is off sick – pension and national insurance contributions, holiday pay and costs of employee benefits.
Paul Hyland, corporate benefits adviser, Wingate Benefit Solutions
Income protection meets an important need for all earners to protect their salary against unforeseen events that could have a significant financial impact.
It has various features to talk about. Up to 75% of earnings can be covered under the policy – insurers do not provide cover beyond this level as there is a danger it will remove the incentive to return to work. Payments can begin after a deferred period of three or six months, and will continue to be paid until the insured person ceases to be employed, reaches retirement, returns to work, or if preferred, after a fixed period of, say five years.
Payments into a pension can also be covered by the policy, as can NI contributions, if an employee is unable to return to work.