Group income protection

Category: Group risk fundamentals · Reviewed by Jake Leat, Associate Director · Last reviewed 2026-06-10

Category: Group risk fundamentals Also known as: GIP, group long-term disability Typical replacement ratio: 50–75% of salary Related concepts: Deferred period group IP, Own occupation group IP, Rehabilitation group IP

Definition

A GIP policy is taken out by the employer and pays benefit to the employer, which is then passed through PAYE to the absent employee as continuing salary. Benefit is payable on satisfaction of the policy definition of incapacity (own occupation, any occupation or suited occupation), after the deferred period and on continuing certification of disability. Most modern schemes include a structured early-intervention and rehabilitation service designed to support return to work.

Legal / Regulatory basis

GIP is a class of insurance distributed under the FCA Handbook (ICOBS). Benefits paid to the employer are treated as trading receipts and the corresponding wage paid to the absent employee is deductible. Benefits passed through to the employee are subject to income tax and Class 1 National Insurance contributions under the Income Tax (Earnings and Pensions) Act 2003. The Equality Act 2010 imposes obligations on employers to make reasonable adjustments before terminating employment on capability grounds, and GIP rehabilitation services often dovetail with that statutory duty.

Scope of cover

Cover typically includes a monthly benefit (often capped at, for example, 75% of pre-incapacity earnings less an offset for state benefits), an option to cover the employer’s NIC and pension contributions while the employee is absent, dependants’ benefit on death during disability, and an integrated rehabilitation service. The benefit terminates on return to work, retirement, death or the expiry of a limited payment term.

Practical example

An accountancy firm covers all employees for GIP at 65% of salary less state benefits, with a 26-week deferred period and benefit payable to age 65. An employee diagnosed with chronic fatigue syndrome is unable to work; after the 26-week deferred period the insurer pays £3,500 a month to the employer, who continues to pay the employee through payroll. The insurer funds a phased return-to-work programme; benefit reduces proportionally as the employee returns to part-time hours and ceases on full recovery.

See also

• Deferred period group IP
• Own occupation group IP
• Any occupation group IP
• Rehabilitation group IP
• Permanent Health Insurance (predecessor to group IP)

References

1. Income Tax (Earnings and Pensions) Act 2003 — https://www.legislation.gov.uk/ukpga/2003/1
2. Equality Act 2010 — https://www.legislation.gov.uk/ukpga/2010/15
3. Financial Conduct Authority, FCA Handbook, ICOBS — https://www.handbook.fca.org.uk/handbook/ICOBS/
4. Group Risk Development (GRiD), Group Risk Market Report 2025
5. HMRC, Employment Income Manual, EIM06410 — https://www.gov.uk/hmrc-internal-manuals/employment-income-manual

This entry is part of the Apex Insurance Wiki. Last reviewed by Apex Insurance Brokers on 2026-06-10. Next review: 2026-12-10.

Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.