Business and group protection

Group income protection explained

Written by Dior Teshayev. Reviewed by Emma Leadbetter.

Published 2026-09-15. Last reviewed 2026-09-15. Next review due 2026-12-15.

Who pays

The employer

Typical deferred periods

13 or 26 weeks ^[20]

What decides claims

The incapacity definition ^[21]

Group risk industry body

GRiD ^[22]

What the contract actually does

Business and group protection are insurance contracts bought by a company rather than by an individual. In exchange for the premium, the insurer agrees to pay a defined benefit when a defined event happens to a named person or a member of a scheme: death, a defined critical illness, or incapacity that stops someone working. What separates these products from personal cover is the plumbing around them — who owns the policy, who pays the premium, where the money lands, and which agreement or trust directs it afterwards. Get that plumbing wrong and a policy can pay the right amount to the wrong party. Before the cover starts, the FCA’s conduct rules require the insurer to provide pre-contract information and the full policy wording. ^[3]

Two structural points shape everything else. First, the company is usually the customer, so the commercial rules apply: the fair-presentation duty under the Insurance Act 2015 rather than the consumer duty of reasonable care. ^[7] Second, the money has a job. Key person cover replaces lost trading income, death in service cover supports an employee’s family, shareholder protection funds a change of ownership, and loan protection clears borrowing. Directors making these decisions are exercising their duty to promote the success of the company. ^[13] This guide stays on group income protection.

How a claim works

A claim starts when the company, the scheme administrator or the family notifies the insurer. The insurer then checks three things: that the person was covered on the date of the event, that the event meets the written definition in the scheme or policy, and that the evidence supports it. On group income protection, that means medical evidence tested against the scheme’s incapacity definition and against the deferred period — usually far longer on a group scheme than on a personal policy. The Financial Ombudsman Service’s published group income protection decisions show all three tests in practice: one claim declined because the medical evidence did not support incapacity for the insured occupation, though the insurer was criticised on claims handling and £150 compensation recommended; one declined where a work-related-stress exclusion applied and the evidence did not show total incapacity through a 26-week deferred period; and one turning on the exact wording of an own-occupation definition where a return on reduced hours was supported. ^[19][20][21] This guide discusses illness only as it relates to cover and claims — for anything clinical, see the NHS.

Your disclosure rights

Commercial insurance carries a different disclosure duty from personal cover. The Insurance Act 2015 requires a business buyer to make a fair presentation of the risk: to disclose every material circumstance it knows or ought to know, in a reasonably clear and accessible way, and the insurer’s remedies for a breach are proportionate to what it would have done had it known. ^[7] In practice that means the company’s knowledge — what the directors and senior management know, and what a reasonable search of the business would have found — is the standard, not one person’s memory. Where an individual employee answers medical questions for their own cover under a scheme or a relevant life plan, the consumer duty to take reasonable care answering questions applies to those answers. ^[6]

Alongside the statutes, the FCA’s conduct rules require insurers to handle claims promptly and fairly and not to reject them unreasonably — the rule the Ombudsman quotes when deciding group protection disputes. ^[3][20] The Consumer Duty applies to retail customers and, importantly for small companies, many micro-enterprises and small businesses can still bring a complaint to the Financial Ombudsman Service. ^[4][5] Check that any insurer, adviser or broker you deal with is authorised on the Financial Services Register. ^[2]

The three clauses that decide every claim

Group income protection claims turn on three clauses, and every published Ombudsman decision on the product illustrates at least one of them. The first is the incapacity definition: an own-occupation definition asks whether the member can do the material duties of their own job, and in one published decision a decline was found fair where medical evidence supported a return on reduced hours under exactly that wording. The second is the deferred period, usually 13 or 26 weeks on a group scheme to sit behind contractual sick pay; in another decision a claim failed partly because the evidence did not show incapacity throughout a 26-week deferred period, and an exclusion also applied. The third is the medical evidence itself: in a third decision the claim was declined for insufficient evidence of incapacity, but the insurer was criticised for how it supported the member through the process and £150 compensation was recommended. Two further design points matter: many schemes step the definition down after a set period on claim, and most schemes limit the benefit period — payment for a fixed number of years per claim rather than to retirement — which is a large part of the price difference between schemes.

Ask the insurer to confirm the incapacity definition, any step-down, the deferred period and the benefit period in writing, and make sure employees are told how to start a claim before they need to. Whatever the specifics of group income protection, the discipline that protects the business is always the same: record who owns the policy, who receives the money and which agreement directs it; get the insurer’s and the accountant’s position in writing; and review the arrangement whenever the people, the shareholdings or the borrowing change.

What moves the price

Premiums on business and group protection are built from the same ingredients as personal cover, plus a few of their own. For single-life business policies — key person, shareholder protection, relevant life, executive income protection — the price follows the individual’s age, health, smoking status and occupation, the sum assured or monthly benefit, the term, and any deferred period. For group schemes the insurer prices the whole population instead: the number of members, the age profile, the mix of occupations, the total salary roll, the benefit design and the scheme’s own claims history. Larger schemes are usually rated on that population rather than on individual medical questions, up to a free cover limit above which individual underwriting applies. Because those limits and scheme minimums vary by insurer and move with market conditions, we do not publish market-wide figures [STATISTIC REQUIRED: current market free cover limits, minimum scheme sizes and typical rates per £100 of salary roll, named insurer sources and dates].

Two levers matter more than shopping around. The first is design: on group income protection, a longer deferred period and a limited benefit period — say five years per claim rather than payment to retirement — change the price materially, because they cap the insurer’s exposure. The second is tax: whether premiums are deductible, and whether a pay-out is taxable, can move the real cost far more than a small difference in quoted rate, which is why HMRC’s purpose test belongs in the conversation from the start. ^[8][10] Pay-out statistics are the counterweight to price: ABI and GRiD data shows 97.9 per cent of individual protection claims were paid in 2024 and again in 2025. ^[17][18]

If something goes wrong

If a claim is declined, delayed, or continuing benefit is stopped, complain to the insurer in writing first, and ask two precise questions: which clause of the scheme rules or policy wording the decision rests on, and exactly which evidence failed that clause. The insurer must investigate and give a final response. If the business is a micro-enterprise or small business — or where the complaint is brought by an employee or their family — the Financial Ombudsman Service can then decide the dispute free of charge, and its published group protection decisions show it awarding compensation for poor claims handling even where the underlying decline was fair. ^[5][19] Larger companies outside the Ombudsman’s scope are left with the insurer’s process and, ultimately, the courts, which is one more reason to have the definitions and the ownership confirmed in writing before a claim ever arises. For the wider picture, read who regulates insurance in the UK.

1. Decide what the money is for Lost profit, a share purchase, a loan repayment or a family benefit — each needs a different structure.
2. Fix ownership and beneficiaries Record who owns the policy, who pays the premium and who receives the pay-out, in writing.
3. Get the tax position in writing Ask your accountant to confirm deductibility and the treatment of the pay-out before the policy starts.
4. Make a fair presentation of the risk Commercial cover requires disclosure of what the business knows or ought to know after a reasonable search.
5. Read the definitions, not the brochure Incapacity definitions, deferred periods and exclusions decide claims on group schemes.
6. Review after every change New shareholders, new borrowing, new headcount or a new salary roll all move the right answer.

Business protection, sick pay and the safety net

Business and group protection sits on top of statutory obligations the company already has. An employer must pay Statutory Sick Pay to eligible employees — £123.25 a week at the time of writing, for up to 28 weeks — and the employer guide sets out the qualifying rules and record-keeping. ^[14][15] Many employers add contractual sick pay on top, and a group income protection scheme is usually designed so its deferred period begins where that contractual sick pay ends. Health-related benefits the company provides also have their own tax reporting rules. ^[16] The individual products are complementary, not interchangeable: income protection replaces the monthly pay packet, critical illness cover pays a lump sum for defined conditions, and life insurance pays others after death. The group and business versions do the same jobs, with a company in the middle.