Should I take out income protection cover through my employer?

Reader Question: Should I take out income protection cover through my employer?

Many employers offer income protection insurance to their staff either as a benefit or on a paid for basis. Here I explain the difference and the benefits of both types of cover.

Employer income protection cover

• also known as Group income protection
• offered by an employer as either a free benefit or on a paid for basis
• often cheaper than personal income protection insurance due to the larger group being insured
• benefit is paid to the employer and then passed on to the employee in full or in part
• if you did not contribute to the cost of cover any benefit received will be taxable as earned income
• if you paid the premiums yourself then any benefits received will be exempt from tax
• cover will cease if you leave your employment
• due to the group nature of the policy a health questionnaire is not normally completed
• previous poor health is not normally an issue providing you are fit to work when you apply for the policy

Personal income protection cover

• policy taken out by the individual with premiums paid monthly
• may be more expensive than a group policy due to the individual assessment involved
• benefit is paid direct to the individual insured
• benefits paid under this type of policy are normally tax free
• cover will continue if you change employer
• a health questionnaire will have to be completed and any pre-existing conditions may be excluded
• the individual can select the features of the policy that suit their needs best e.g. when payments start and how long they are paid for