GIP benefits

◆ What are Group Income Protection (GIP) Benefits?

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Group Income Protection benefits, sometimes called Permanent Health Insurance benefits, can provide a regular income if you are unable to work because of illness or incapacity.

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They usually pay a fixed percentage of your basic salary, often between 50% and 75%, for a set period such as five years, or in some cases until retirement or State Pension age.

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◆ How do I qualify for GIP benefits?

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Most policies require you to be unable to carry out the main duties of your own role during the deferred period, which is usually the first 26 weeks of long-term sickness absence. This is often called an “own occupation” test.

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Some policies use a wider test, such as “suited occupation”, where you must show that you cannot do a role suited to your skills, qualifications and experience. Others use an “any occupation” test, which means you must be unable to carry out the main duties of any occupation, but this is not common.

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◆ How are GIP benefits provided?

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Your employer usually takes out an insurance policy with an insurer. The employer owns the policy and agrees the terms with the insurer. You are the beneficiary, which means that if your claim is accepted, the benefits are normally paid to you through payroll in the same way as salary.

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Because you do not have a direct contract with the insurer, you will usually need your employer's support to apply for and maintain the GIP benefits.

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◆ What are common GIP terms?

 

Common terms found in GIP policies include:

1. Disclosure of pre-existing medical conditions;

2. Exclusion of certain categories of illness, such as work-related stress;

3. Definition of what is incapacity to receive GIP benefits;

4. How incapacity is assessed;

5. Duration of GIP benefits;

6. The requirement to be regularly reviewed by the insurer to ensure that you continue to meet their eligibility criteria;

7. Definition of salary to be used to calculate GIP benefits.

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◆ Can I obtain a copy of the GIP policy?

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Your employer may not agree to provide a full copy of the policy because the contract is between the employer and the insurer. However, most employers should be able to provide a clear summary of the main terms, including eligibility, exclusions, the deferred period, the level of benefit and how long payments may continue.

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◆ How do I apply for GIP benefits?

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The process varies by insurer. You may be asked to complete a form explaining your illness or disability, your symptoms, your treatment and how your condition affects your ability to work and manage day-to-day activities. Some insurers arrange a telephone assessment instead.

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In all cases, you will also be asked to provide consent for the insurer to obtain and review your medical records before deciding whether you meet the policy eligibility criteria.

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◆ What happens if the insurer rejects your claim?

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You can usually appeal the decision. If the appeal is rejected, many insurers offer a further complaints stage. If that is unsuccessful, you generally have six months from the insurer's final decision to complain to the Financial Ombudsman Service.

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In my experience, claims are often rejected for one of the following reasons:

 

• Insufficient medical evidence to support the employee is incapacitated;

• The incapacity is caused by work-related stress; and/or

• The incapacity, typically mental health condition, is caused by personal circumstances.

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◆ What should my employer do to help me obtain GIP benefits?​

 

Your employer has an implied duty to take reasonable steps to help you procure GIP benefits.

 

In practice, this means they should take an active role in the process, provide or signpost you to key policy information, pass information between you and the insurer promptly, and make appropriate representations on your behalf where needed.

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◆ What happens if I am accepted to the GIP scheme?

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If your claim is accepted, you will usually receive the GIP benefit through payroll each month, after tax and National Insurance deductions. Once you are admitted to the GIP scheme, the insurer will normally need a proper reason to stop payments if it later decides that you no longer meet the eligibility criteria.

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The insurer will usually review your case from time to time to confirm whether you remain eligible, and to consider whether you may be able to return to work with or without reasonable adjustments.

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◆ Can my employer terminate my employment while I am receiving GIP benefits?

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The short answer is yes, but only if the reason for dismissal is genuinely separate from your entitlement to GIP benefits. An employer should not dismiss an employee without good cause where the effect would be to deprive them of GIP benefits.

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A common example of a potentially fair reason is a genuine redundancy situation, such as a wider restructuring where the role is no longer required.

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◆ Do I continue to receive holiday and other benefits while on GIP benefits?

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Yes. Statutory holiday continues to accrue during sick leave. Depending on the terms of your employment and the policy, you may also continue to receive other benefits, such as employer pension contributions and private medical health insurance cover.

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◆ Can an insurer offer a lump sum instead of ongoing GIP payments?

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In some cases, an insurer may offer a one-off lump sum instead of continuing monthly GIP payments. This is sometimes called a commuted lump sum.

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The tax treatment can be complex but if your employment is being terminated as a result of the cessation of GIP benefits, it can usually be paid tax free under a tax exemption for being a termination payment on account of disability. It will depend on the circumstances, so it is important to take advice before accepting any offer.