Employee Insurance in the UK: A Complete Guide

This guide offers an overview of the 3 top-rated employee insurance products: life insurance, group income protection and critical illness insurance.

Yugi the Giraffe - 17 September 2021

For many organisations, their people are their most valuable asset. A good employee benefits package can play a big part in the success of any business by helping them attract and retain the best talent - although, what you choose to provide will depend on the specific needs of your workforce and where their priorities lie.

Many employers are adopting employee insurance policies to cover their staff as this demonstrates a meaningful interest in their life and wellbeing. Research has found that the top insurance benefits workers wanted their employer to offer were: employee life insurance, group income protection and critical illness insurance.

Providing employees with insurance makes a meaningful contribution to their financial wellbeing and makes them feel valued, meaning they are more likely to be loyal to their organisation. Group risk benefits let employers insure their staff in a simple cost-effective way by protecting a group of employees under a single umbrella.

However, how do you know which group risk benefits are worth the cost and will make a real difference for your business?

This guide offers an overview of the 3 major group insurance products most desired by employees:

Employee Life Insurance

Group Life Insurance (sometimes known as Death in Service) provides money to employees' family members in the event of their death, enabling them to continue living a similar quality of life in an extremely difficult time without added financial pressures

A tax-free lump sum will be paid to an employee’s beneficiaries, usually the people who depend on them like their partner or children, if they tragically die and are unable to continue providing financial support.

It's often calculated as a multiple of base salary, so if an employee earned £30,000 and had a 4x salary policy, their dependants would get £120,000. Although employers can also choose to pay out a fixed amount instead.

Whilst not compulsory or a legal requirement, life cover for employees is considered one of the best types of employee benefits you can offer. It’s a great way for employers to show they care about their employees’ financial wellbeing. It’s your promise to them that if the worst happens, financial support will be provided for their loved ones.

Group Income Protection

Group Income Protection, also known as Sick Pay, is a financial product that’s built to support employees if they can’t work for a long period of time due to illness or injury. It provides them with a regular income to keep their finances in check when they’re unable to work.

Employers choose a percentage of the employees’ original salary to be covered (typically up to 80%), which will be paid monthly to the employee after the selected period of time when cover starts.

The time after which the Group Income Protection kicks in is known as the deferred period. Many employers choose for payments to start after 6 months, as this is when statutory sick pay ends in the UK, but other options are available. Employers can also choose different levels of cover and different criteria for different groups of employees.

As well as the payout starting time, employers need to choose the length of time that the benefit will be paid if the employee does not go back to work. The duration of protection may be all the way to the State Pension Age, or the employer can select a specific timescale for the policy. For example, some policies have a limited term, which means they only pay out up to a set time – say 5 years off work, rather than to retirement age.

Income protection is a great way of looking after your employees’ financial, mental and physical wellbeing if they’re unable to work for a prolonged time. It isn’t just about paying out if an employee is off sick. As part of a proactive approach to wellbeing, income protection can also come with access to support that helps the employee return to work as soon as possible.

Some employers take a more proactive approach to income protection insurance by offering a rehabilitation support service that helps employees in the early stages of being absent to speed up their recovery and get them back to work when ready.

Critical Illness Insurance

Critical illness is an extremely valuable insurance policy. It pays out if an employee or one of their loved ones becomes seriously ill or is diagnosed with a critical illness, providing financial support when it really matters by allowing them to cover treatment costs, subsidise a lost income or pay to adapt their home. Every employee’s needs are different.

Critical Illness Cover pays out a tax-free lump sum to the employee if they’re diagnosed with one of a number of specific medical conditions and survive for a minimum period of time once they're diagnosed, usually between 14 and 28 days. The Critical Illness Insurance will list exactly which serious illnesses are covered, but these typically include cancer, heart attacks, stroke, MS, dementia and Parkinson’s Disease, among others.

Employers choose the value of the lump sum paid out, either a multiple of their salary or a fixed amount. Policies generally payout for the employee or their child, but employers can also cover their employees’ partners if they wish. Whatever the choices, this protection will be making a real difference to their lives.

Providing critical illness cover for your team will show them you care about them, and can help with talent attraction and retention. Sickness can be expensive and critical illness cover gives employees peace of mind to know they are protected should the unfortunate happen.

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If you are looking to provide insurance for employees, YuLife is here to help. Our group risk benefits including Life Insurance, Income Protection and Critical Illness provide essential financial protection to employees and their families, providing a financial lifeline to people when they need it most.

YuLife is the first digital insurance provider to offer long-term financial protection for employees and engage with them by rewarding healthy lifestyle changes via our gamified app. This is supported by an extensive package of preventative health benefits that protect the wellbeing of employees.

Yugi the Giraffe

Yugi is our YuLife mascot. Like all giraffes they've got a big heart – in fact the biggest heart of all land animals.